<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
COMPTEK RESEARCH INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[COMPTEK RESEARCH INC. LOGO]
July 12, 1999
Dear Fellow Shareholder:
The Annual Meeting of Comptek Research, Inc., to be held August 13, 1999,
at University at Buffalo, Amherst Campus, Center for the Arts, Room 112,
Buffalo, New York 14260, will present an opportunity for you to meet Comptek's
management team and to become more acquainted with the business activities of
your company. Your attendance will, as well, give us an opportunity to meet with
you, and to hear your views and concerns. We hope that you will be able to
attend.
The formal portion of the Annual Meeting will begin promptly at 10:00 a.m.
Between 9:30 a.m. and 10:00 a.m., a complimentary continental breakfast will be
available. We will also have some of our products displayed for viewing before
and after the meeting.
So that we can make appropriate arrangements, please let us know that you
are coming by checking the appropriate box at the top of your proxy vote card,
or calling 716-677-4070, Ext. 517. If you require directions to the Center for
the Arts, please call the above number and we will be happy to assist you.
I look forward to seeing you.
Sincerely,
/s/ John J. Sciuto
John J. Sciuto
Chairman, President, and
Chief Executive Officer
<PAGE> 3
[COMPTEK RESEARCH INC. LOGO]
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 13, 1999
To the Shareholders:
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of Comptek
Research, Inc. (the "Company") will be held at the University at Buffalo,
Amherst Campus, Center for the Arts, Room 112, Buffalo, New York 14260, on
Friday, August 13, 1999, at 10:00 a.m., local time, for the following purposes:
1. To elect four Class I directors for a term of two years and until their
successors shall have been elected and qualified.
2. To consider and act upon an amendment of the Company's Certificate of
Incorporation to increase the authorized shares of common stock from 10
million to 20 million.
3. To consider and act upon the adoption of the 1999 Employee Stock
Purchase Plan.
4. To consider and act upon the amendment of the 1994 Stock Option Plan for
Non-Employee Directors.
5. To ratify the selection by the Board of Directors of KPMG LLP as the
Company's independent auditors for the current fiscal year.
6. To transact such other business as may properly come before the meeting.
The close of business on June 16, 1999, has been fixed as the record date
for determining the shareholders entitled to notice of, and to vote at, the
Annual Meeting.
By order of the Board of Directors,
/s/ Christopher A. Head
CHRISTOPHER A. HEAD,
Secretary
July 12, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE, AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ENCLOSED
ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE> 4
[COMPTEK RESEARCH INC. LOGO]
2732 TRANSIT ROAD
BUFFALO, NEW YORK 14224
(716) 677-4070
-------------------------------
PROXY STATEMENT
-------------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
AUGUST 13, 1999
-------------------------------
GENERAL
This Proxy Statement and accompanying form of proxy have been mailed on or
about July 12, 1999, to the shareholders of record on June 16, 1999, of COMPTEK
RESEARCH, INC., a New York corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders to be held on Friday, August 13, 1999 (the
"Annual Meeting"), and at any adjournment or adjournments thereof.
Shares represented by an effective proxy in the accompanying form, unless
contrary instructions are specified in the proxy, will be voted FOR each of the
proposals set forth in the accompanying Notice of Annual Meeting of
Shareholders. Any proxy may be revoked at any time before it is voted. A
shareholder may revoke his proxy by executing another proxy at a later date, by
notifying the Secretary of the Company in writing of his revocation, or by
attending and voting at the Annual Meeting. Revocation is effective only upon
receipt of notice by the Secretary.
The Company will bear the cost of soliciting proxies by the Board of
Directors. The Board of Directors may use the services of the Company's
executive officers and certain directors to solicit proxies from shareholders in
person and by mail, telegram and telephone, and the Company may reimburse them
for reasonable out-of-pocket expenses incurred by them in so doing. In addition,
the Company will request brokers, nominees and others to forward proxy materials
to their principals and to obtain authority to execute proxies. The Company will
reimburse such brokers, nominees and others for their reasonable out-of-pocket
and clerical expenses incurred by them in so doing.
The securities entitled to vote at the Annual Meeting are shares of common
stock, par value $.02 per share, of the Company. Each share is entitled to one
vote. The close of business on June 16, 1999, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and any adjournment or adjournments thereof. At that date,
5,086,223 shares of common stock were outstanding. The Company's by-laws require
that a majority of the outstanding shares be present or represented in order to
establish a quorum for the holding of the Annual Meeting.
3
<PAGE> 5
With respect to the election of each director, a shareholder may either
vote "for" a nominee named herein or "withhold authority" to vote for such
nominee. The affirmative vote of a plurality of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote is required for
the election of a nominee. Broker non-votes will be counted as being present or
represented at the meeting for purposes of establishing a quorum, but will not
have an effect on the outcome of the vote for the election of directors.
Accordingly, withholding an affirmative vote from a particular nominee will not
prevent that person from being elected to the Board of Directors.
A shareholder may withhold authority to vote (not voting) or vote "for,"
vote "against," or "abstain" from voting on each of the following proposals:
1. Amendment of the Company's Certificate of Incorporation.
2. Adoption of 1999 Employee Stock Purchase Plan.
3. Amendment of the 1994 Stock Option Plan for Non-Employee Directors.
Broker non-votes and abstentions will be counted as being present or
represented at the meeting for purposes of establishing a quorum.
The proposed amendment of the Certificate of Incorporation requires a vote
"for" the amendment by a majority of the shares outstanding and entitled to vote
at the Annual Meeting. Therefore, withholding of authority to vote, a broker
non-vote, and a vote to "abstain" are the equivalent of a vote "against" the
proposed amendment of the Certificate of Incorporation.
The proposed adoption of the 1999 Employee Stock Purchase Plan and the
proposed amendment of the 1994 Stock Purchase Plan for Non-Employee Directors
each require a vote "for" their respective adoption by a majority of the votes
casts thereon. Therefore, withholding of authority to vote, a broker non-vote,
and a vote to "abstain" will have no affect on the outcome on such proposals.
4
<PAGE> 6
PRINCIPAL SHAREHOLDERS
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of June 16, 1999,
with respect to the beneficial ownership of the Company's common stock by all
persons or groups (as such terms are used in Section 13(d)(3) of the Securities
Exchange Act of 1934) known by the Company to be the beneficial owners of more
than 5% of its outstanding common stock (the only class of stock outstanding).
The table includes persons having the right to acquire beneficial ownership of
the Company's common stock through the conversion of outstanding debentures.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT
------------------------------------ ----------------- -------
<S> <C> <C>
James D. Morgan............................................. 327,838(2) 6.4%
2732 Transit Road
Buffalo, NY 14224
J. Carlo Cannell............................................ 360,900(3) 7.1%
D/B/A Cannell Capital Management
600 California Street
Floor 14
San Francisco, CA 94108
Fleet Financial Group, Inc.................................. 351,400(4) 6.9%
One Federal Street
Boston, MA 02110
Warburg Pincus Emerging Growth Fund......................... 736,842(5) 12.7%
466 Lexington Avenue
New York, NY 10017
</TABLE>
- ---------------
(1) The beneficial ownership information presented is based upon information
furnished by each person or contained in filings with the Securities and
Exchange Commission. Pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as amended, beneficial ownership of a security consists of sole
or shared voting power (including the power to vote or direct the vote)
and/or sole or shared investment power (including the power to dispose or to
direct the disposition) with respect to a security whether through any
contract, arrangement, understanding, relationship or otherwise. Except as
otherwise indicated, the named person has sole voting and investment power
with respect to the common shares set forth opposite his name. Percentages
have been calculated on the basis of 5,086,223 shares outstanding, plus, as
appropriate, shares subject to options or subject to debenture conversion
and deemed outstanding pursuant to Rule 13d-3(d)(1).
(2) Amount indicated includes options to purchase 6,900 shares which are
exercisable within 60 days of June 16, 1999.
(3) Shared voting and dispositive power for all shares listed.
(4) Sole voting power for 268,600 shares and sole dispositive power for all
shares listed.
(5) Amount indicated represents shares of common stock issuable upon the
conversion of debentures to common stock.
5
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of common shares of
the Company as of June 16, 1999, by each director and nominee, each executive
officer who is named in the Summary Compensation Table, and by all directors and
executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT
------------------------ ----------------- -------
<S> <C> <C>
Joseph A. Alutto............................................ 24,100(2) *
Laura L. Benedetti.......................................... 19,651(3) *
John R. Cummings............................................ 204,000(4) 4.0%
G. Wayne Hawk............................................... 216,138(5) 4.2%
Christopher A. Head......................................... 74,969(6) 1.5%
Patrick J. Martin........................................... 14,000(7) *
Wayne E. Meyer.............................................. 0 *
James D. Morgan............................................. 327,838(8) 6.4%
Lawrence M. Schadegg........................................ 41,889 *
John J. Sciuto.............................................. 156,387(9) 3.0%
Henry P. Semmelhack......................................... 224,786(2) 4.4%
All executive officers and directors as a group
(13 persons).............................................. 1,303,211(10) 24.4%
</TABLE>
- ---------------
* less than 1%
(1) The beneficial ownership information presented is based upon information
furnished by each person or contained in filings with the Securities and
Exchange Commission. Pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as amended, beneficial ownership of a security consists of
sole or shared voting power (including the power to vote or direct the
vote) and/or sole or shared investment power (including the power to
dispose or to direct the disposition) with respect to a security whether
through any contract, arrangement, understanding, relationship or
otherwise. Except as otherwise indicated, the named person has sole voting
and investment power with respect to the common shares set forth opposite
his name. Percentages have been calculated on the basis of 5,086,223 shares
outstanding, plus, as appropriate, shares subject to options and deemed
outstanding pursuant to Rule 13d-3(d)(1).
(2) Amount indicated includes options to purchase 19,000 shares which are
exercisable within 60 days of June 16, 1999.
(3) Amount indicated includes options to purchase 18,266 shares which are
exercisable within 60 days of June 16, 1999.
(4) Amount indicated includes 40,000 shares held by Dr. Cummings's wife,
Barbara Cummings. Also included are options to purchase 17,000 shares which
are exercisable within 60 days of June 16, 1999.
(5) Amount indicated includes options to purchase 19,000 shares which are
exercisable within 60 days of June 16, 1999. Also included are 500 shares
owned by Mr. Hawk's wife, Charline Hawk. Mr. Hawk disclaims any beneficial
ownership of the shares held by his wife.
(6) Amount indicated includes options to purchase 62,548 shares which are
exercisable within 60 days of June 16, 1999.
(7) Amount indicated includes options to purchase 14,000 shares which are
exercisable within 60 days of June 16, 1999.
(8) Amount indicated includes options to purchase 6,900 shares which are
exercisable within 60 days of June 16, 1999.
(9) Amount indicated includes options to purchase 93,074 shares which are
exercisable within 60 days of June 16, 1999.
(10) Amount indicated includes options to purchase 268,788 shares which are
exercisable within 60 days of June 16, 1999.
6
<PAGE> 8
PROPOSAL NO. 1
ELECTION OF DIRECTORS
TERM OF OFFICE
The Company's current Board of Directors is divided into two classes
serving staggered two-year terms. Four directorships are designated Class I and
four directorships are designated Class II. The current Class II directors were
elected at the 1998 Annual Meeting. Nominees for Class I directors are for a
two-year term expiring at the 2001 Annual Meeting.
NOMINEES FOR DIRECTOR
Each nominee has consented to be named as a nominee and to serve if
elected. No circumstances are presently known which would render any of the
nominees named herein unavailable for election. In the event, however, that a
nominee becomes unavailable for election, it is expected that the proxies will
be voted for a substitute nominee recommended by the Board of Directors, unless
the Board reduces the number of directors to be elected.
The Class I nominees (Messrs. Sciuto, Morgan, Semmelhack, and Meyer) are
currently serving as directors of the Company. Directors Sciuto, Morgan and
Semmelhack were previously elected by the shareholders at the 1997 Annual
Meeting. Director Meyer was appointed to the Board of Directors in September
1998 by the unanimous vote of the other directors.
The principal occupation for the last five years of each nominee for
election as director and each of the continuing directors is listed below.
Unless otherwise indicated, the information with respect to the nominees and
continuing directors is as of June 16, 1999. None of the nominees nor any
continuing director is related to an executive officer or to any other director.
NOMINEE FOR ELECTION AS CLASS I DIRECTORS
TERM EXPIRING IN 2001
John J. Sciuto
Age 56
Director since 1996
Mr. Sciuto was appointed President and Chief
Executive Officer of Comptek Research, Inc. on April
1, 1996. Effective April 1, 1997, he was elected to
the additional position of Chairman of the Board.
Mr. Sciuto has been President and Chief Executive
Officer of Comptek Federal Systems, Inc., the
Company's principal operating subsidiary, since its
incorporation in 1992. Prior to that, Mr. Sciuto was
President of the Federal Systems Division of Comptek
Research, Inc.
James D. Morgan
Age 62
Director since 1968
Mr. Morgan is Vice President and Chief Scientist and
also a founder of the Company. He was a Vice
President for Barrister Information Systems
Corporation (law office automation products and
services) from April 1982 to April 1990 and is
currently serving on Barrister's Board of Directors.
Henry P. Semmelhack
Age 62
Director since 1968
Mr. Semmelhack has been President, Chief Executive
Officer and Chairman of the Board of Barrister
Information Systems Corporation (law office
automation products and services) since 1982. A
founder of the Company, he served as its Chief
Executive Officer until May 1983. Mr. Semmelhack is
a director of Merchants Group, Inc. (insurance
company).
Wayne E. Meyer
Age 73
Director since 1998
Rear Admiral Wayne E. Meyer entered the private
sector in 1985 as a consultant, speaker and writer
an presently provides technical expertise to a
variety of commercial and government clients. He
retired from the Navy in 1985 after 42 years of
active naval service. He is currently President of
the Wayne E. Meyer Corporation. Rear Admiral Meyer
is the Chairman of Mikros Corporation (developer of
digital radio technology).
7
<PAGE> 9
CONTINUING CLASS II DIRECTORS
TERM EXPIRING IN 2000
Joseph A. Alutto
Age 58
Director since 1987
Dr. Alutto was appointed Dean of the Fisher College
of Business at The Ohio State University in March
1991. Dr. Alutto served as Dean of the School of
Management at the State University of New York at
Buffalo from 1977 to 1990. He also serves on the
Board of Directors of United Retail Group, Inc.
(specialty retailer of women's apparel).
John R. Cummings
Age 66
Director since 1968
Dr. Cummings is retired. He was Chairman of the
Board from September 1990 until March 31, 1997. He
served as President and CEO from October 1991 until
March 31, 1996. He previously was a Vice President
and Chief Scientist of the Company since its
formation, and is a founder of the Company.
G. Wayne Hawk
Age 71
Director since 1977
Mr. Hawk is retired. He was Chairman and Chief
Executive Officer of Acme Electric Corporation from
August 1992 until his retirement in October 1993. He
was President and Chief Executive Officer from
August 1991 to August 1992. Prior thereto, he served
as President and Chief Operating Officer since April
1991, and President and Chief Executive Officer from
January 1987 to April 1991.
Patrick J. Martin
Age 58
Director since 1993
Dr. Martin is Corporate Senior Vice President and
President, Developing Markets Operations for Xerox
Corporation. From 1996 to 1998 he was President,
Americas Customer Operations. Dr. Martin was
President of the Office Products Division of Xerox
Corporation from 1993 to 1996. From 1991 to 1993,
Dr. Martin was President and General Manager of
Xerox Corporation's Americas Customer Operations. In
1992, Dr. Martin was elected to the additional post
of Corporate Vice President. Dr. Martin is a
director of Central Vermont Public Service
Corporation (electric utility).
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of five meetings
(including both regular and special meetings) during the fiscal year ended March
31, 1999. During fiscal year 1999, the Company had two committees: the Audit
Committee and the Compensation Committee.
The Audit Committee currently consists of directors Alutto, Cummings, Hawk
and Semmelhack. The Audit Committee met twice during the fiscal year ended March
31, 1999. The Audit Committee's functions include recommending to the Board of
Directors the engagement of the Company's independent certified public
accountants, and reviewing with such accountants the plan for and results of
their auditing engagement.
The Compensation Committee currently consists of directors Alutto, Martin,
Hawk, and Meyer. The Compensation Committee met twice during the fiscal year
ended March 31, 1999. The Compensation Committee approves compensation
arrangements for senior management and directors, and administers the Company's
Equity Incentive Plans.
The Company does not currently have a Nominating Committee. Nominees for
directors of the Company are selected by the full Board of Directors. The Board
of Directors will consider nominees recommended by shareholders of the Company.
The names and information supporting any such nominee should be sent to
Christopher A. Head, Esq., Secretary, Comptek Research, Inc., 2732 Transit Road,
Buffalo, NY 14224, who will submit them to the Board of Directors.
During the fiscal year ended March 31, 1999, each of the directors, except
Patrick Martin, attended at least 75 percent of the meetings of the Board of
Directors and committees of the Board of Directors on which he was appointed.
Due to schedule conflicts, Dr. Martin only attended 57 percent of such meetings
(4 of 7 meetings) during fiscal year 1999.
8
<PAGE> 10
COMPENSATION AND RELATED MATTERS
COMPENSATION OF DIRECTORS
Employee-directors receive no additional compensation for service on the
Board of Directors or its Committees. For fiscal year 1999, directors who are
not employees received an annual retainer of $16,000, payable in quarterly
installments of $4,000. In addition, each non-employee director receives a fee
of: (i) $1,000 per Board of Directors' meeting attended up to an annual maximum
of $6,000; and (ii) $1,000 per Committee meeting attended if held on different
day than a board meeting, or $500 per committee meeting attended if held on the
same day as a board meeting, up to an annual maximum of $5,000.
Each non-employee director is automatically granted a non-statutory option
to purchase 10,000 shares of the Company's common stock at 100% of fair market
value as of the date of the director's election, appointment, or designation as
a non-employee director. In addition, each non-employee director, effective five
business days after each Annual Meeting, is automatically granted a
non-statutory option to purchase 1,000 shares of the Company's common stock at
100% of fair market value as of the date of grant.
In addition, in order to encourage ownership of the Company by non-employee
directors, each non-employee director is automatically granted a non-statutory
option to purchase 5,000 shares of the Company's common stock at 100% of fair
market value as of the first day of the calendar quarter following such
director's first attaining ownership of at least 5,000 shares of the Company's
common stock.
Included on the agenda for the 1999 Annual Meeting is a proposed amendment
of the 1994 Stock Option Plan for Non-Employee Directors to, among other things,
add 200,000 shares to the plan reserve set aside for option grants to
non-employee directors and allow for discretionary grants to such directors. See
Proposal No. 4.
EXECUTIVE COMPENSATION
The following table contains information for the fiscal years ended March
31, 1999, 1998, and 1997, concerning the compensation received by the Company's
Chief Executive Officer and the other four most highly compensated executive
officers of the Company whose salary and bonus exceeded $100,000 for the fiscal
year ended March 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
OTHER ANNUAL
FISCAL SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)
- --------------------------- ------ ------ ----- ------------
<S> <C> <C> <C> <C>
JOHN J. SCIUTO 1999 247,249 100,000 56,129(2)(4)
Chairman, President, 1998 227,133 100,000 51,438(2)(4)
and CEO 1997 190,000 100,000 33,997(2)(4)
CHRISTOPHER A. HEAD 1999 148,822 38,000(5) 423(11)
Executive Vice President, 1998 136,551 30,000(5) --
General Counsel, and 1997 125,008 25,000(5) --
Secretary
JAMES D. MORGAN 1999 121,127 20,000(5) 16,502(7)
Vice President and Chief 1998 109,750 20,000(5) 3,596(7)
Scientist 1997 103,210 20,000(5) --
LAURA L. BENEDETTI 1999 95,398 30,000(5) --
Vice President, Chief 1998 79,555 20,000(5) --
Financial Officer and 1997 63,718 15,014(5) --
Treasurer
LAWRENCE M. SCHADEGG 1999 153,391(9) 27,266 611(7)
President, Comptek PRB 1998 N/A N/A N/A
Associates, Inc. 1997 N/A N/A N/A
<CAPTION>
LONG-TERM COMPENSATION
ALL
RESTRICTED SECURITIES OTHER
STOCK UNDERLYING LTIP COMPEN-
AWARD(S) OPTIONS PAYOUTS SATION
NAME AND PRINCIPAL POSITION ($) (#) ($) ($)(1)
- --------------------------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C>
JOHN J. SCIUTO -- -- -- 5,495
Chairman, President, -- -- -- 26,367(6)
and CEO -- 133,074(8) 17,500(3) 3,762
CHRISTOPHER A. HEAD -- 2,528 -- 3,879
Executive Vice President, -- 10,000 -- 3,485
General Counsel, and -- 27,040(8) 27,500(3) 4,081
Secretary
JAMES D. MORGAN -- -- -- 1,463
Vice President and Chief -- -- -- 2,192
Scientist -- 6,900(8) -- 2,271
LAURA L. BENEDETTI -- 3,000 -- 2,479
Vice President, Chief -- 10,000 -- 1,940
Financial Officer and -- 10,600(8) -- 830
Treasurer
LAWRENCE M. SCHADEGG 187,500(10) -- -- 14,028
President, Comptek PRB - N/A N/A N/A
Associates, Inc. -- N/A N/A N/A
</TABLE>
9
<PAGE> 11
- ---------------
(1) Amounts contributed by the Company or its subsidiaries under retirement
savings plans as matching and annual contributions based upon the
individual's level of participation in the Plan as described below under
"Retirement Savings Plans."
(2) In connection with the purchase of 62,178 shares of the Company's common
stock, Comptek Federal Systems, Inc., a subsidiary of the Company, provided
John J. Sciuto low interest loans in the amount of $218,415 in fiscal 1997
and $76,704 in fiscal 1999. The listed amount includes a gross-up of
$25,000 in each fiscal year reported representing anticipated federal and
state tax liability associated with the portion of Mr. Sciuto's incentive
compensation applied to the repayment of the loans. Such gross-up is
provided by the Company in consideration of Mr. Sciuto's commitment to
apply at least 50% of any bonus earned to the repayment of the loan. Also
included is $7,242 for fiscal 1997, $8,359 for fiscal 1998, and $5,649 for
fiscal 1999 representing the difference between the interest paid and the
amount which would have been paid had the loan carried a market interest
rate. Also included is a payout of unused vacation in the amount of $17,539
in fiscal 1998 and $25,368 in fiscal 1999.
(3) The amount indicated reflects a one-time termination payout under a
discontinued long-term incentive plan.
(4) In connection with the exercise of an incentive stock option to acquire
5,405 shares of common stock, the Company provided John J. Sciuto an
interest-free loans in the amounts of $21,278 in 1996 and $22,135 in fiscal
1999 to reimburse him for alternative minimum tax incurred in the
transaction in exchange for his agreement to hold the shares acquired for
at least two years. The loans were provided pursuant to the terms of the
Company's 1992 Equity Incentive Plan. The listed amount represents imputed
interest of $112 for fiscal 1999, $540 for fiscal 1998 and $1,755 for
fiscal 1997, which would have been paid had the loan carried a market
interest rate.
(5) Twenty-five percent of such annual bonus was paid in stock of the Company
at fair market value in lieu of cash.
(6) This listed amount includes $21,278 representing cancellation of the one of
the loans described in note (4) above.
(7) Payout of unused vacation.
(8) Includes options which were issued as replacement options at a new lower
price in exchange for the surrender of older higher priced options
("repriced options"). Mr. Sciuto received 33,074 repriced options in fiscal
1997; all of the options reported for Mrs. Benedetti and Messrs. Head and
Morgan for fiscal 1997 were repriced options. Repriced options were issued
at 100% of fair market value at date of grant subject to a new three-year
vesting schedule.
(9) Salary information for Mr. Schadegg is for the eleven month period May 1,
1998 through March 31, 1999, rather than the full fiscal year. Mr. Schadegg
first became an executive officer in May 1998, as a result of the Company's
acquisition of PRB Associates, Inc.
(10) May 14, 1998, grant of 20,000 restricted shares vesting at the rate of
2,500 shares pre three-month period beginning August 1, 1998 and ending May
1, 2000. The value of these shares as of March 31, 1999, was $162,500.
(11) In connection with the exercise of an incentive stock option to acquire
shares of common stock, the Company provided Christopher A. Head an
interest-free loan in the amount of $13,650 to reimburse him for
alternative minimum tax incurred in the transaction in exchange for his
agreement to hold the shares acquired for at least two years. The loan was
provided pursuant to the terms of the Company's 1992 Equity Incentive Plan.
The listed amount represents imputed interest of $423 for fiscal 1999,
which would have been paid had the loan carried a market interest rate.
INCENTIVE COMPENSATION PLAN
Company officers and certain other key personnel participate in an
incentive compensation arrangement based on predetermined corporate and
individual goals, including revenue, profit, project completion and contract
award levels established at the beginning of each fiscal year.
10
<PAGE> 12
The base amount of an individual's incentive compensation potential is
established annually. Officers' incentive compensation levels are established by
the Compensation Committee of the Board of Directors and are approved by the
Board of Directors. Directors, as such, are not eligible to participate in the
Plan. Amounts paid to the named Executive Officers are set forth in the Summary
Compensation Table.
STOCK OPTIONS/STOCK APPRECIATION RIGHTS (SARS) GRANTS IN FISCAL YEAR 1999
The following table contains information relating to stock options granted
to the named executive officers in fiscal 1999.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
ANNUAL RATES
OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
------------------------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS/
OPTIONS SAR GRANTED TO EXERCISE OR
GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) FISCAL YEAR ($/SHARE) DATE 5%(3) 10%(3)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Sciuto None -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
Christopher A. Head 2,528(2) 2.3% $9.375 05/14/2008 $14,905 $37,772
- --------------------------------------------------------------------------------------------------------
James D. Morgan None -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
Lawrence M. Schadegg None -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
Laura L. Benedetti 3,000(2) 2.6% $ 8.75 04/01/2008 $16,508 $41,836
</TABLE>
- ---------------
(1) Options to purchase shares of common stock granted under the Company's 1992
Equity Incentive Plan. No SAR's were granted during the last fiscal year.
(2) Options are exercisable starting one year after grant date, with 1/3 of the
options becoming exercisable on each successive anniversary date, with full
exercisability occurring on the third anniversary date. Such options were
granted for a term of 10 years, subject to earlier termination in certain
events related to termination of employment.
(3) The dollar amounts in these columns were calculated using an assumed annual
compounded growth over the term of the option of 5% and 10%, respectively.
Use of this model should not be viewed in any way as a forecast of the
future performance of the Company's stock, which will be determined by
future events and unknown factors. The closing price of the common stock on
the American Stock Exchange on March 31, 1999, was $8.125.
11
<PAGE> 13
STOCK OPTIONS/SARS EXERCISED IN FISCAL 1999 AND YEAR-END VALUES
The following table reflects the number of stock options and SARs exercised
by the named executive officers in fiscal 1999, the total gain realized upon
exercise, the number of stock options held at the end of the year, and the
realizable gain of the stock options that are "in-the-money." In-the-money stock
options and SARs are stock options or SARs with exercise prices that are below
the year-end stock price because the stock value increased since the date of the
grant.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
# OF SECURITIES
UNDERLYING
UNEXERCISED
OPTIONS/SARS AT VALUE OF UNEXERCISED,
FISCAL IN-THE-MONEY OPTIONS
YEAR-END AT FISCAL YEAR END(2)
SHARES ------------------ ----------------------
ACQUIRED ON VALUE EXERCIS- UNEXER- EXERCIS- UNEXER-
EXERCISE REALIZED(1) ABLE CISABLE ABLE CISABLE
NAME (#) ($) (#) (#) ($) ($)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Sciuto 18,595 78,480 62,049 71,025 158,873 183,188
- -------------------------------------------------------------------------------------------------
Christopher A. Head 7,000 42,000 53,609 18,209 189,616 39,203
- -------------------------------------------------------------------------------------------------
James D. Morgan -- -- 4,600 2,300 11,500 5,750
- -------------------------------------------------------------------------------------------------
Lawrence M. Schadegg -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------
Laura L. Benedetti -- -- 10,399 13,201 25,998 25,503
</TABLE>
- ---------------
(1) Based upon the difference between the closing price of the common stock on
the American Stock Exchange on the date or dates of exercise and the
exercise price or prices for the stock options.
(2) Based upon the closing price of the common stock on the American Stock
Exchange on March 31, 1999, of $8.125 per share.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Role of the Compensation Committee
Each year the Compensation Committee, which is comprised entirely of
outside directors, evaluates and establishes the compensation arrangements for
executive officers, including a review and approval of annual salaries, annual
and long-term incentive plan awards, standards of performance for new awards,
payouts from past awards, and program participation and design. The Compensation
Committee also administers the Company's 1992 Equity Incentive Plan and the
Company's 1998 Equity Incentive Stock Plan for all participants. In evaluating
compensation for executive officers, the Committee has from time to time
retained the services of independent compensation experts, reviewed industry
available data and surveys, and received recommendations from management and the
Company's Human Resources Department regarding overall compensation plans and
structures.
Executive Compensation Philosophy
The fundamental objective of the Company's Executive Compensation Program
is two-fold: to attract and retain highly competent and motivated individuals by
providing a compensation package which is industry competitive, and to emphasize
a reward system which is based upon the individual's contribution to the overall
success and performance of the Company. The Committee applies the following
guiding principles in establishing compensation levels for executives: (1)
Incentives should represent a strong portion of the Company's Executive
Compensation Program; (2) Salary should be reasonable in reference to position
responsibilities and industry norms; (3) Fixed costs should be controlled while
encouraging performance-based variable costs which link to the financial results
of the Company; and (4) The executive officers should
12
<PAGE> 14
have significant equity ownership opportunities. It is the Committee's belief
that this approach will allow for a linking of compensation with shareholder
value and serve to attract and retain qualified individuals capable of producing
superior results. With reference to these principles, the Compensation Committee
for fiscal year 1999 (April 1, 1998 through March 31, 1999), evaluated the
compensation paid to the executive officers named in the Summary Compensation
Table.
Base Compensation. The Committee's approach to base compensation is to
offer competitive salaries in comparison with market averages. The Committee
makes base compensation decisions in an annual review with input from the CEO,
market pay statistics, and nationwide trends of executives in similar positions
in companies with similar sales volumes. This information is used as a frame of
reference for annual salary adjustments and starting salaries. The Committee
considers both the Company's performance (e.g., stock price, return on assets,
and earnings growth v. budget) as well as individual decision-making
responsibilities and work performance of each position incumbent. With respect
to the CEO, as discussed below, the primary factor is profitability.
Annual Incentive Compensation Plan. The Company uses the Annual Incentive
Compensation Plan to serve as an incentive for executive officers and other key
employees to accomplish annual Company performance objectives. The performance
objectives for the Plan are established at the beginning of the fiscal year
subject to modification in the event of a significant operating change. Plan
performance objectives include overall corporate profitability and performance
results of the specific business unit of the Company under a participant's
direct control. Individual target amount for incentive compensation are based
upon compensation survey averages and range between 20% and 50% of the
individual's base salary.
Long-Term Incentive Compensation. The Company traditionally has used stock
options under its Equity Incentive Plans to serve as an incentive to executive
officers and other key employees based on the Company's stock market value. The
grant of stock options under the Plans is subjective, based on perception of the
individual's performance, functional responsibility, and position within the
Company. Awards are typically considered at the time of the individual's annual
performance review or change in responsibilities or position.
Stock Ownership Requirements. The Compensation Committee has established
minimum stock ownership requirements for its executive officers and certain
other senior managers. Specific requirements applicable to the chief executive
officer are discussed below under "Fiscal 1999 Chief Executive's Pay."
Fiscal 1999 Chief Executive's Pay
The Compensation Committee reviews the compensation of the CEO within the
context of published survey data issued by the American Electronics Association,
Watson Wyatt, William Mercer Company, and Western Management Group providing
compensation information for a group of companies similar to the Company in size
and business focus. Based upon its own analysis, the Committee established a
base salary, incentive award targets, and equity compensation for John J.
Sciuto, as Chief Executive Officer.
For fiscal year 1999, the Compensation Committee fixed Mr. Sciuto's base
salary at $249,000. The Committee believed that such amount was an appropriate
base salary given Mr. Sciuto's experience in the defense industry and the
Company's position in that industry. Consistent with the Committee's philosophy
of emphasizing incentive compensation, the Committee for fiscal 1999 established
a target amount of incentive compensation which would be paid to the chief
executive officer and other officers if pre-determined earnings were achieved.
Based upon diluted earnings per share of $0.65, a 27% increase from the prior
year, Mr. Sciuto received incentive compensation of $100,000, representing 100%
of his targeted amount for fiscal 1999. Such earnings are the highest in the
Company's history.
For fiscal year 2000 (April 1, 1999 through March 31, 2000), the Committee
increased Mr. Sciuto's base salary to $280,000, continued his target bonus at
$100,000 and increased his earnings target. Accordingly, notwithstanding the
record earnings level achieved in fiscal 1999, no bonus will be paid to Mr.
Sciuto for fiscal 2000 unless fiscal 2000 earnings increase over fiscal 1999 by
an amount established by the Committee. The specific amount of the target bonus
and annual increase in earnings target is a subjective determination by the
Committee predicated on industry growth rates and bonus levels.
13
<PAGE> 15
In connection with Mr. Sciuto's appointment as president and chief
executive officer effective April 1, 1996, the Committee granted Mr. Sciuto
options on 100,000 shares of stock vesting ratable over a period of five years,
50,000 of which are also subject to the attainment of certain performance
objectives. In addition, the Committee required Mr. Sciuto to acquire and retain
a minimum of 50,400 shares of common stock of Comptek. As of March 31, 1999, Mr.
Sciuto owned 63,258 shares.
In order to facilitate Mr. Sciuto's purchase in July 1996 of 43,683 shares
from the Company, the Company's subsidiary loaned to Mr. Sciuto $218,415. This
loan, which bears interest at the annual rate of 3.7%, is due and payable on the
earlier of July 8, 2001 or ninety days after Mr. Sciuto ceases to be employed by
the Company. The loan agreement further provides that a minimum of 25% of the
gross amount of any incentive compensation paid to Mr. Sciuto will be used to
pay down the outstanding balance of the loan. If Mr. Sciuto elects to apply at
least 50% of such incentive compensation to loan repayment, then the amount
applied will be grossed-up to satisfy Mr. Sciuto's anticipated tax liability
related to the portion of his incentive compensation applied to re-payment. For
fiscal year 1999, Mr. Sciuto applied $50,000 of his incentive compensation award
to loan repayment and as a result received an additional $25,000 payment to
satisfy anticipated tax liability. Through June 1999, a total of $150,000 has
been repaid on this loan. During the fourth quarter of fiscal 1999, the
Company's subsidiary loaned to Mr. Sciuto an additional $76,704, on
substantially similar terms but due January 31, 2004, to facilitate his purchase
of 18,495 shares.
Company Position on Limitation of Deductibility of Executive Pay
Effective as of January 1, 1994, Section 162(m) of the Internal Revenue
Code of 1986 (the "Internal Revenue Code") generally denies a deduction to any
publicly-held corporation for compensation paid to its chief executive officer
and its four highest-paid executive officers to the extent that any such
individual's compensation exceeds $1 million, subject to certain exceptions,
including one for "performance-based compensation." Compensation paid to such
executive officers of the Company for fiscal year 1999 is expected to be
tax-deductible since no such amount exceeds the $1 million limit. Under Section
162(m) of the Internal Revenue Code and the regulations and transition rules
issued by the Internal Revenue Service, it is highly unlikely that any one of
the Company's executive officers will receive compensation in the current fiscal
year that is nondeductible under Section 162(m). With respect to future years,
the Company intends to study the application of Section 162(m) of the Internal
Revenue Code to its compensation plans and practices, and will consider possible
changes thereto that may be necessary to qualify future compensation paid to its
executive officers for deductibility under Section 162(m) of the Internal
Revenue Code.
The Compensation Committee of the
Board of Directors
Joseph A. Alutto
G. Wayne Hawk
Patrick J. Martin
Wayne E. Meyer
Compensation Committee Interlocks and Insider Participation
During part of the last fiscal year, Henry P. Semmelhack served as a member
of the Compensation Committee, but is not currently a member of the Committee.
Henry P. Semmelhack was President and Chief Executive Officer of the
Company from 1968 to 1983. From 1983 to 1992 he served as a consultant to the
Company. Mr. Semmelhack's wife Tricia T. Semmelhack is a partner in the Buffalo,
New York, law firm Hodgson, Russ, Andrews, Woods & Goodyear, which firm has in
the past and is anticipated may in the future provide legal services to the
Company.
James D. Morgan, an executive officer and director of the Company, is a
director and member of the Compensation Committee of Barrister Information
Systems Corporation ("Barrister") and as such reviews and approves the
compensation paid by Barrister to Henry P. Semmelhack as an executive officer of
Barrister.
14
<PAGE> 16
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
common shares of the Company for the last five fiscal years with the cumulative
total return on the Standard & Poors 500 Index, and the Peer Group Index over
the same period (assuming the investment of $100 in the Company's common shares,
the Standard & Poors 500 Index, the Peer Group Index, and the reinvestment of
all dividends.)
The Peer Group consists of Analysis & Technology, Inc., VSE Corporation,
Diagnostic/Retrieval Systems, Inc., The Titan Corporation, GRC International,
Inc., BTG, Inc., Tech-Sym Corporation.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG COMPTEK RESEARCH, INC., THE S&P 500 INDEX
AND A PEER GROUP
<TABLE>
<CAPTION>
COMPTEK RESCH, INC. PEER GROUP S & P 500
------------------- ---------- ---------
<S> <C> <C> <C>
3/94 100.00 100.00 100.00
3/95 70.00 118.00 116.00
3/96 26.00 188.00 153.00
3/97 30.00 122.00 183.00
3/98 46.00 130.00 271.00
3/99 42.00 104.00 321.00
</TABLE>
* $100 INVESTED ON 03/31/94 IN STOCK OR INDEX--
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING MARCH 31.
EMPLOYMENT CONTRACTS
The Company currently has employment contracts with certain of its key
employees, including each of the Executive Officers named in the Summary
Compensation Table. Effective November 1, 1997, Messrs. Sciuto and Head entered
into one-year employment agreements with the Company, which provide for an
automatic annual renewal unless terminated by the Company or the employee.
Effective April 1, 1998, Mrs. Benedetti entered into a similar employment
agreement with the Company. Annual salaries payable under such agreements as of
June 16, 1999, are as follows: John J. Sciuto, $280,000; Christopher A. Head,
$160,000; and Laura L. Benedetti, $125,000. Under each agreement, in the event
of either voluntary or involuntary termination of employment, the Company is
obligated to make a termination payment in twelve monthly installments, equal to
one year's salary as of the termination date, plus a one-time payment at the
time of termination equal to 50 percent of the employee's target bonus in effect
at the time of termination, in consideration of the officer's agreement not to
compete with the Company during the one-year period.
Mr. Morgan currently has an employment agreement with the Company, which
expires March 31, 2001, calling for his provision of approximately 1,048 hours
of service to the Company each fiscal year at an hourly
15
<PAGE> 17
rate of $115.00. The Company may terminate the agreement prior to its scheduled
expiration date without cause on twelve months advanced written notice.
In connection with the acquisition of PRB Associates, Inc. in May 1998, the
Company's subsidiary, Comptek PRB Associates, Inc., entered into an employment
agreement with Mr. Schadegg, expiring April 30, 2001. The annual salary payable
under such contract as of June 16, 1999 is $184,069. In the event of an
involuntary termination without cause, the Company is obligated to make a
termination payment in twelve monthly installments, equal to one year's salary
as of the termination date. Mr. Schadegg is obligated not to compete with the
Company for a period of one year following his termination of employment.
RETIREMENT SAVINGS PLANS
Comptek Research Plan. The Company established a defined contribution plan
known as the Comptek Research Retirement Savings Plan effective June 1, 1985.
This Plan is intended to meet the requirements of Section 401(k) of the Code.
Full-time regular employees of Comptek Research and its Comptek Federal
Systems subsidiary participate in the Plan. At April 1, 1999, there were 633
Participants.
Currently under the Plan, the Company will make an automatic contribution
equal to 1% of gross pay at the end of each fiscal year to the individual
account of each eligible employee. To be eligible for the automatic
contribution, an employee must have been continuously employed on a full-time
basis for the entire fiscal year. In addition, the Plan provides for a Company
match of $.30 per $1.00 contributed on the first 4% of pay contributed to the
Plan by a participant.
A participant at all times is 100% vested in his contributions and
contributions made by the Company. Distributions are made under the Plan only
upon retirement, death, disability, separation from service or in the case of
certain hardships. There is also a loan provision in the Plan.
All contributions under the Plan are placed into individual accounts for
each Participant. For the year ended March 31, 1999, the Company contributed a
total of $593,688 for all eligible employees, including Executive Officers. The
Company's contributions for the last fiscal year for each of Executive Officers
Sciuto, Head, Morgan and Benedetti are included in the Summary Compensation
Table.
PRB Associates Plan. During the fiscal year ended March 31, 1999, the
Company's subsidiary, Comptek PRB Associates, Inc., maintained a separate
defined contribution plan for the employees of Comptek PRB, also under Section
401(k) of the Code. At April 1, 1999, there were 273 participants.
Under the provisions of the Plan, Comptek PRB may make a discretionary
annual contribution to the individual account of each eligible employee at the
end of each plan year. To be eligible, an employee must be credited with 1,000
hours of service during the plan year for which the contribution is made and
must be a active employee on the last day of the plan year. Additionally, the
employee must have attained age 21 and have been credited with 1,000 hours of
service within 12 consecutive months subsequent to date of hire to be eligible
to participate as of the following January 1 or July 1. In addition, the Plan
provides for a matching contribution of $0.25 per $1.00 contributed on the first
4% of pay contributed to the Plan by a participant.
Participants may make voluntary contribution to the Plan in the form of 1%
to 14% salary deductions or in the form of rollovers. Participant contributions
and the related earnings are always 100% vested. Participants vest over a period
of seven years in employer discretionary and matching contributions.
Distributions are made under the Plan upon retirement, death, disability,
separation from service, or in the case of certain hardships. The Plan contains
a loan provision that allows each participant to have two loans maximum
outstanding at any time. For the year ended March 31, 1999, the Company
contributed a total of $1,084,476 for all eligible employees.
The Company's contribution for the last fiscal year for Executive Officer
Lawrence Schadegg is included in the Summary Compensation Table.
16
<PAGE> 18
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
The Company, pursuant to its by-laws, indemnifies its directors, officers,
benefit plan trustees, other fiduciaries, and employees as permitted by law in
connection with proceedings which might be instituted against them by reason of
their service for or on behalf of the Company. The Company has purchased
directors' and officers' liability insurance which provides indemnification for
the Company and its directors and officers. The current policy, issued by the
Chubb Group, is effective for the period of April 1, 1999, through March 31,
2001, at an annual premium of $65,000.
CERTAIN TRANSACTIONS
The lease for the Company's Hollywood, Maryland facility was assumed in
connection with the Company's acquisition of PRB Associates, Inc. in May 1998.
The lease is with a partnership of the former principal shareholders of PRB,
included Lawrence Schadegg, an executive officer of the Company. The lease
expires on April 30, 2001, and provides for an annual net rent of $1,200,000.
The Company believes that the terms of this lease reflect current market
conditions in that location.
In connection with the purchase of the business operations of Amherst
Systems, Inc. in March 1999, the Company assumed tenant responsibilities for a
facility in Williamsville, New York leased from Charles E. Dowdell, a founder
and former principal shareholder of Amherst and his wife. Mr. Dowdell became an
executive officer of the Company on March 26, 1999. The lease, which continues
until May 31, 2004, provides for an annual net rent of $647,544. The Company
believes that the terms of the lease reflect current market conditions in that
location.
Comptek Federal Systems, Inc., a subsidiary of the Company, currently has
outstanding two loans totaling $145,119 to John J. Sciuto, the Company's
chairman, president and chief executive officer. These loans, one granted in
1997 and the other in 1999, were provided to Mr. Sciuto to facilitate his
purchase of 62,178 shares of the Company. The loans carry an annual interest
rate of 3.7% and provides for repayment by the earlier of ninety days after Mr.
Sciuto leaves the Company's employ or July 8, 2001 for the 1997 loan and January
31, 2004 for the 1999 loan. The loan agreements provide that Mr. Sciuto will
apply at least 25% of any incentive compensation to the repayment of the loans.
The loan agreements further provide that if Mr. Sciuto applies at least 50% of
such incentive compensation to loan repayment, then the amount applied will be
grossed-up to satisfy Mr. Sciuto's anticipated tax liability related to the
portion of his incentive compensation applied to repayment. For fiscal year
1999, Mr. Sciuto applied $50,000 of his incentive compensation award to loan
repayment and as a result received an additional $25,000 payment to satisfy
anticipated tax liability.
During the fiscal year ended March 31, 1999, the Company retained, and in
the future anticipates retaining, the Buffalo, New York, law firm of Hodgson,
Russ, Andrews, Woods & Goodyear, LLP to perform certain legal services. Director
Henry P. Semmelhack's wife, Tricia T. Semmelhack, is a partner in such law firm.
COMPLIANCE WITH SECTION 16 FILING REQUIREMENTS
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during April 1, 1998, through March 31, 1999, all filing requirements
applicable to its officers, directors, and greater-than-ten-percent beneficial
owners were met.
PROPOSAL NO. 2
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF
COMMON STOCK OF THE COMPANY
FROM 10 MILLION SHARES TO 20 MILLION SHARES
The Board of Directors is recommending that shareholders take action at the
Annual Meeting to approve an amendment to the Company's Certificate of
Incorporation to increase the total number of authorized shares of common stock.
As of June 16, 1999, the Company had 5,086,223 shares of common stock issued and
17
<PAGE> 19
outstanding, and an additional 2,383,984 shares subject to options granted or
issuable on conversion of outstanding debentures. This leaves 2,529,793 shares
available for issuance to meet other corporate needs. In the judgment of the
Board of Directors the available amount is low. Accordingly, to Board of
Directors recommends that action be taken to increase the number of authorized
shares of common stock from 10,000,000 to 20,000,000.
The Board of Directors believes that the authorization of additional shares
of common stock is desirable and would provide future flexibility for the
Company. The increase in authorized shares would provide authorized common stock
for issuance from time to time as may be necessary in connection with future
financings, investment opportunities, acquisitions, the declaration of stock
dividends or stock splits, other distributions, or for other corporate purposes.
The Company has no present plans, understandings or agreements for issuing the
additional shares, other than the debenture conversion and option grants noted
above and as provided for in Proposal No. 3, the 1999 Employee Stock Purchase
Plan, and Proposal No. 4, the amendment of the 1994 Stock Option Plan for
Non-Employee Directors. It is desirable, however, to have authorization for
additional shares of common stock in order to enable the Company, as the need
may arise, to take prompt advantage of market conditions and the availability of
favorable opportunities without the delay and expense incident to the holding of
a special shareholders' meeting.
Under New York law, shareholders are not entitled to dissenters' rights
with respect to the proposed amendment to the Company's Certificate of
Incorporation. Holders of common stock have no preemptive rights with respect to
any shares which may be issued in the future, and the issuance of additional
shares of common stock may, therefore, dilute the equity ownership position of
current shareholders. In addition, although the increase in the number of
authorized shares is not intended for anti-takeover purposes, the additional
authorized shares may be issued by the Board of Directors without further
shareholder approval, and could (if consistent with the Board's fiduciary
responsibilities) be utilized to deter future attempts to gain control of the
Company.
The affirmative vote of the holders of a majority of the outstanding shares
of common stock is required for the approval of the proposed amendment to the
Company's Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN FAVOR OF THE
PROPOSAL UNLESS THE SHAREHOLDER SPECIFIES OTHERWISE.
PROPOSAL NO. 3
ADOPTION OF THE
1999 EMPLOYEE STOCK PURCHASE PLAN
On May 24, 1999, the Board of Directors approved for submission to
shareholders at the 1999 Annual Meeting of the Company the 1999 Employee Stock
Purchase Plan (the "Stock Purchase Plan"). The Stock Purchase Plan covers the
granting to eligible employees options (the "Options") to purchase shares of the
Company's common stock periodically through payroll deductions. Such shares may
be authorized but unissued shares, treasury shares or shares bought on the open
market.
The Stock Purchase Plan is designed to help the Company in retaining and
attracting personnel of outstanding competence by rewarding them for their
achievements. The Stock Purchase Plan also is intended to encourage a sense of
proprietary interest by such personnel by providing them with a means to
acquire, or increase their, shareholder interest in the Company. As of June 16,
1999, approximately 1,200 employees would be eligible to participate in the
Stock Purchase Plan.
The Stock Purchase Plan is intended to replace the 1996 Employee Stock
Purchase Plan (the "Prior Plan") and comply with Section 423 of the Internal
Revenue Code. The Prior Plan was approved by shareholders in 1996 and included
250,000 shares in its plan reserve. The Prior Plan, as of the end of fiscal
1999, had 286 participants. The Prior Plan reserve was exhausted on March 31,
1999.
The Common Stock of the Company is traded principally on the American Stock
Exchange. On June 16, 1999, the closing price of the Company's common stock on
the American Stock Exchange was $8.0625.
18
<PAGE> 20
The following summary of the principal provisions of the Stock Purchase
Plan is subject in all respects to the full text of the Stock Purchase Plan
annexed hereto as Exhibit A.
DESCRIPTION OF THE PLAN
Eligible Employees and Terms of Participation. Each employee of the Company
or a designated subsidiary whose customary employment is more than 20 hours per
week is eligible to participate in the Stock Purchase Plan as of the effective
date of such Plan or the first "option period" (as hereinafter defined)
occurring at least 30 days after his date of employment by the Company or a
subsidiary, whichever is later. An eligible employee who elects to participate
(individually, the "Participant" and collectively the "Participants") in the
Stock Purchase Plan shall specify a percentage of his gross compensation to be
deducted from his bi-weekly pay (up to a maximum of 10% of his gross
compensation) to be applied to the purchase of Shares during each Option period.
The payroll contributions of each Participant may not exceed an amount
which, if used to purchase Shares pursuant to the Stock Purchase Plan, would
violate any provision of the Stock Purchase Plan. A Participant may not receive
an Option under the Stock Purchase Plan if immediately after the Option is
granted the Participant would own stock possessing five percent or more of the
total combined voting power or value of all classes of stock of the Company or a
subsidiary.
No Participant may purchase more than 1,200 shares of Common Stock pursuant
to the Stock Purchase Plan during any Plan year. No Participant shall be granted
an Option under the Stock Purchase Plan or an option under any other employee
stock purchase plan maintained by the Company or a subsidiary pursuant to which
the Participant's right to purchase shares of Common Stock under all such
options would accrue at a rate at which the "fair market value" (as hereinafter
defined) of the shares (determined at the time the option is granted) would
exceed $25,000 for each calendar year in which any of the options granted to
such employee is outstanding at any time. "Fair Market Value" on a specific date
shall mean the average of the bid and asked closing prices at which one share of
Common Stock is traded on the over-the-counter market or the closing price for a
share of Common Stock on the stock exchange, if any, on which shares of Common
Stock are primarily traded at such time.
A Participant may not change his payroll contributions during an "option
period" (as hereinafter defined). A Participant may elect to change his payroll
contributions for a subsequent option period by providing notice not less than
25 days prior to the "date of grant" (as hereinafter defined) for the option
period with respect to which such change is to be effective, setting forth the
new amount of his payroll contribution. "option period" shall mean the three
consecutive month period beginning as of the related "date of grant" (January
1st, April 1st, July 1st or October 1st, as the case may be).
Each Participant automatically and without any act on his part will be
deemed to have exercised each of his Options on a "date of exercise" (the last
day of the applicable option period). The number of Shares subject to each
Option shall be the quotient of the balance credited to the Participant's
account as of a date of exercise divided by an amount equal to 85% of the fair
market value of a share of Common Stock as of the date of grant of the Option or
the date of such exercise, whichever is less, but in no event less than the par
value of a share of Common Stock (the "Option Price"). If the number of Shares
which remain to be issued under the Stock Purchase Plan is less than the number
of Shares to be purchased as of the date of exercise, based on the amounts then
credited to the Participants' accounts, a pro rata allocation of the available
Shares will be made among the Participants. Any balance remaining in a
Participant's account after payment of the Option Price for Shares purchased
pursuant to the Stock Purchase Plan will be carried over into the Participant's
account for the subsequent option period, or refunded if there will be no such
subsequent option period.
Any Participant may withdraw in whole, but not in part, from the Stock
Purchase Plan at any time. A Participant who withdraws from the Stock Purchase
Plan will be eligible to participate again in the Stock Purchase Plan commencing
with the date of grant which next follows the six consecutive month period
beginning with the date the Participant elected to withdraw from the Stock
Purchase Plan.
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<PAGE> 21
If any Participant resigns or his employment with the Company or any of its
subsidiaries ceases for any reason other than death or retirement, any
unexercised Option granted to such Participant will terminate as of the date of
the termination of the Participant's employment. The Company promptly will
refund to the Participant the amount of the balance in the Participant's
account, and thereupon, the Participant's interest in the Stock Purchase Plan
and any Options granted thereunder will terminate.
If a Participant's employment with the Company ceases because of his
retirement (on or after the day such Participant reaches age 65 or upon such
other date upon which he is eligible to retire under a tax-qualified retirement
plan of the Company or a subsidiary), he may, at his election, either (i)
exercise his Options as of the date of his termination of employment, or (ii)
request payment of the balance in his account under the Stock Purchase Plan, in
which event the Company promptly will make such payment, and thereupon his
interest in the Stock Purchase Plan and any Options granted thereunder will
terminate.
If a Participant's employment is terminated because of his death, the
executor of his will or the administrator of his estate may either (i) exercise
the Participant's Option as of the date of his death, or (ii) request payment of
the balance of the Participant's account under the Stock Purchase Plan, in which
event the Company promptly will make such payment, and thereupon the
Participant's interest in the Stock Purchase Plan and any Options granted
thereunder will terminate.
An Option granted under the Stock Purchase Plan will not be transferable
otherwise than by will or the laws of descent and distribution, and is
exercisable during the Participant's lifetime only by him.
The Stock Purchase Plan contemplates that all funds contributed by
Participants will be under the control of the Company and may be used for
general corporate purposes.
No Options will be granted under the Stock Purchase Plan after October 31,
2005. If any Option expires or is not exercised pursuant to its terms, the
Shares subject to such Option shall again be available for grant pursuant to the
Stock Option Plan.
Adjustments. If, prior to the complete exercise of any Option, a stock
dividend is declared and paid upon the shares of Common Stock or if the shares
of Common Stock shall be split-up, converted, exchanged, reclassified, or in any
way substituted for, the Option, to the extent that it has not been exercised,
will entitle the holder thereof upon the future exercise of the Option to such
number and kind of securities or cash or other property, subject to the terms of
the Option, to which he would have been entitled had he actually owned the
shares subject to the unexercised portion of the Option at the time of the
occurrence of such stock dividend, split-up, conversion, exchange,
reclassification or substitution, and the aggregate purchase price upon the
future exercise of the Option will be equal to the lessor of 85% of the fair
market value of a share of Common Stock as of the date of grant, determined as
if the originally optioned shares were being purchased thereunder, or 85% of the
fair market value of the shares or other securities, cash or property actually
acquired upon the exercise of the Option, determined as of the date of exercise.
Any fractional shares or other securities payable upon the exercise of the
Option as a result of such adjustment shall be payable in cash based upon the
fair market value of such shares or securities at the time of such exercise. If
any such event should occur, the number of shares with respect to which Options
remain to be issued, or with respect to which Options may be reissued, shall be
adjusted in a similar manner.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation in which the Company is not the
surviving corporation, or in which the Company becomes a subsidiary of another
corporation, or upon the sale of all or substantially all of the property of the
Company to another corporation, the Stock Purchase Plan and the Options issued
thereunder shall terminate, unless provision is made in connection with such
transaction for the assumption of Options theretofore granted, or the
substitution for such Options of new options of the successor employer
corporation or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kinds of shares and the per share exercise prices.
Shares Reserved for Issuance. The Stock Purchase Plan provides for an
initial reserve of 400,000 Shares for sale to eligible employees. The Stock
Purchase Plan also provides for an annual increase, commencing April 1, 2000, in
the shares reserved for sale to eligible employees of either 200,000 Shares or a
lesser number of Shares determined by the Board of Directors. Because the
Company's total employment has increased from 620 on April 1, 1998 to 1,200 on
April 1, 1999, and the exact level of future employee participation cannot be
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<PAGE> 22
predicted, the Board of Directors believes it is appropriate to provide for an
annual increase in the Shares reserved for sale in order to substantially
decrease the likelihood of a shortfall of Shares reserved for issuance.
Recent accounting pronouncements have altered the accounting treatment in
the case of a shortfall of shares reserved for issuance under an employee stock
purchase plan. As a result, if a shortfall occurs during a purchase period, the
Company is unable to continue the plan subject to shareholder approval at the
next annual meeting of an increase without potentially incurring significant
compensation charges. While an automatic annual increase minimizes the
likelihood of a shortfall and compensation charge, the Stock Purchase Plan will
require periodic monitoring to ensure that no shortfall occurs. If a shortfall
occurs, the Company will make a pro rata allocation of the shares remaining
available for purchase in as uniform a manner as shall be practicable and as it
shall determine to be equitable.
NEW BENEFITS
The number of Shares to be purchased under the 1999 Employee Stock Purchase
Plan by specific officers, all executive officers as a group, and all other
Participants is not currently determinable. The following table sets forth
information as to such individuals' and groups' purchases of Shares during the
last fiscal year under the 1996 Employee Stock Purchase Plan, which the 1999
Employee Stock Purchase Plan is intended to replace.
<TABLE>
<CAPTION>
NUMBER OF SHARES DOLLAR VALUE(1)
NAME AND POSITION PURCHASED ($)
----------------- ---------------- ---------------
<S> <C> <C>
JOHN J. SCIUTO
Chairman, President and CEO................................. 330 2,681
CHRISTOPHER A. HEAD
Executive Vice President, General Counsel and Secretary..... 458 3,756
LAWRENCE M. SCHADEGG
President, Comptek PRB Associates, Inc...................... 1,889 14,951
JAMES D. MORGAN
Vice President and Chief Scientist.......................... 0 0
LAURA L. BENEDETTI
Vice President, Chief Financial Officer and Treasurer....... 240 1,911
All current Executive Officers as a group................... 2,917 23,299
All current Non-Executive Directors as a group.............. -- --
All current Non-Executive Officer Employees as a group...... 101,669 818,266
</TABLE>
- ---------------
(1) Calculated by multiplying the number of shares purchased times the market
price of the common stock on the purchase date.
FEDERAL TAX ASPECTS
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). The Stock Purchase Plan is not qualified under
Section 401 (a) of the Code. The Company believes the following to be a general
outline of the federal income tax consequences to the Participant and the
Company.
A Participant will not be subject to tax upon the receipt of an Option
under the Stock Purchase Plan or upon the purchase of the Shares pursuant to the
Option. If a Participant disposes of the Shares acquired pursuant to an Option
more than two years following the date of grant and more than one year following
the date of exercise, or in the event of the Participant's death (whenever
occurring) while owning such Shares, the Participant is required to include as
compensation in his gross income as of the date of disposition or death an
amount equal to the lesser of. (i) the difference between 85% and 100% of the
fair market value of the Shares as of the date of grant, or (ii) the excess of
the fair market value of such Shares at the time of disposition or
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<PAGE> 23
death over the purchase price. in the case of such a disposition only (not
death), the Participant's basis in such Shares is increased by an amount equal
to the amount so includable as compensation, and any gain or loss computed with
reference to such adjusted basis which is recognized at the time of the
disposition is long-term capital gain or loss. In the case of such a disposition
or the Participant's death, the Company is not entitled to any deduction from
income.
If a Participant disposes of such Shares within such two-year or one-year
period, the Participant is required to include in income as compensation for the
year in which such disposition occurs an amount equal to the excess of the fair
market value of such Shares on the date of purchase over the purchase price. The
Participant's basis in such Shares in his hands at the time of disposition is
increased by an amount equal to the amount includable in his income as
compensation, and any gain or loss computed with reference to such adjusted
basis which is recognized at the time of disposition is capital gain or loss
either short-term or long-term, depending on his holding period for such Shares.
In the event of a disposition within such two-year or one-year period, the
Company is entitled to a deduction from income equal to the amount the
Participant is required to include in income as compensation as a result of such
disposition in the year of such disposition.
In the case of a Participant, who is a citizen of the United States
employed abroad, all or a portion of income in the nature of compensation (but
not capital gain) may, under certain circumstances, be excludable from U.S.
income under Section 911 of the Code.
ADMINISTRATION OF THE PLAN
The Stock Purchase Plan will be administered by either the Board acting as
a committee of the whole or by a committee appointed by the Board (the
"Committee").
The Committee shall establish such rules and procedures as are necessary or
advisable to administer the Plan. The interpretation and construction by the
Committee of any provisions of the Stock Purchase Plan or of any Option granted
under it will be final unless otherwise determined by the Board. The Committee
may amend the Stock Purchase Plan as it relates to any Option which has not been
granted. In addition, the Committee, with the consent of each adversely affected
Participant may at any time: (i) cancel any outstanding Option or (ii) amend the
Plan as it relates to any outstanding Option. Notwithstanding the foregoing, any
amendment by the Committee which would: (i) increase the number of Shares
issuable under Options, or (ii) change the class of employees to whom Option may
be granted, shall be subject to the approval of the shareholders of the Company
within one year of such amendment.
REQUIRED VOTE FOR APPROVAL OF THE PLAN
The affirmative vote of a majority of votes casted at the annual meeting on
this proposal will be required for approval of the Stock Purchase Plan.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE FOR APPROVAL OF THE
STOCK PURCHASE PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
IN FAVOR OF THE PROPOSAL UNLESS THE SHAREHOLDER SPECIFIES OTHERWISE.
PROPOSAL NO. 4
AMENDMENT OF THE 1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The 1994 Stock Option Plan for Non-Employee Directors (the "Plan") was
approved by the Shareholders at the Company's 1994 Annual Meeting. Shareholders
are currently being asked to vote on amendment of the Plan to authorize, inter
alia, the following changes:
1. The number of shares subject to the Plan be increased to 300,000
from 100,000.
2. The initial automatic grant of options be reduced to 1,000 shares
from 10,000.
3. The Plan provide for discretionary grants of options to
non-employee directors by the Board of Directors in addition to the
periodic automatic grant of options.
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<PAGE> 24
4. Options granted on an automatic basis shall be exercisable in full
as of the date of grant.
5. Options granted at the discretion of the Board of Directors shall
be exercisable as determined by the Board at the time of grant.
The following is a brief description of the key provisions of the Amendment
and the Plan. It is intended only as a summary and is qualified by reference to
the entire text of the Plan and the Amendments which are annexed hereto as
Exhibit B.
CURRENT PLAN FEATURES
The Plan currently provides for up to 100,000 shares of the Company's
common stock to be subject to the grant of options between December 10, 1993 and
the Plan termination date of December 9, 2003 to non-employee directors of the
Company. The Plan provides that each eligible director, effective the date he or
she becomes a non-employee member of the Board of Directors will automatically
receive an option to purchase 10,000 shares of the Company's common stock. The
Plan further provides that each eligible director shall automatically receive an
additional option to purchase 1,000 shares of common stock effective at the
close of business, five business days after each annual meeting of shareholders.
The Plan also provides for each non-employee director to automatically receive a
grant of an option to purchase 5,000 shares of the Company's common stock on the
first day of the calendar quarter following such director first obtaining
ownership of at least 5,000 shares of the Company's common stock.
The option price for each share subject to an option is 100 percent of fair
market value of the shares as of the option grant date. The common stock of the
Company is listed on the American Stock Exchange. On June 16, 1999, the closing
price of the Company's common stock was $8.0625.
DESCRIPTION OF PROPOSED AMENDMENTS
On August 17, 1998, the Board of Directors amended the Plan to increase the
number of shares available for grant as provided for in Articles 4 and 5, to
300,000 shares from 100,000 shares.
On April 16, 1999, the Board of Directors further amended the Plan to
authorize the Board of Directors to make discretionary grants of options in
addition to the automatic grants provided for in the Plan. The directors further
provided for the amendment of the Plan to specify that automatic grants would be
exercisable in full as of the date of grant, rather than vesting one year after
the date of grant, as was previously provided for in the Plan. The addition of
discretionary authority to grant options is proposed in order to give the Board
of Directors greater flexibility in setting its compensation in the exercise of
its business judgment and allow for varying grant amounts for different
directors if the Board of Directors deems such difference appropriate. At the
time of the Plan's original adoption, the inclusion of discretionary authority
to grant options would have resulted in the Plan not complying with the
conditions of Rule 16b-3 of the Securities Exchange Act. Since that time, Rule
16b-3 has been amended to allow for discretionary grants.
The Financial Accounting Standards Board, as part of a Proposed
Interpretation of APB Opinion No. 25, recently announced its intention to
require companies, to recognize an earnings charge as of the vesting date for
the fair value of options granted to non-employee directors. In order to
minimize this type of charge, the Plan is amended to reduce the initial
automatic grant of options to 1,000 shares from 10,000 shares and provide for
immediate vesting. The Board of Directors believes this will serve to avoid a
potentially greater future charge to earnings.
NEW PLAN BENEFITS
Executive officers and employees are not eligible for any benefits under
the Plan. Non-executive directors will receive all of the benefits available
under the Plan. A total of 21,000 options at exercise prices of $7.875 to $8.25,
have been granted subject to the shareholders' approval of the amendment of the
Plan at the 1999 Annual Meeting. The exact number of additional options and
exercise price per option that will be granted under the Plan is not presently
determinable. Based upon the annual automatic grant formula, 1,000 options will
be granted to each of the Company's six non-employee directors following the
1999 Annual Meeting.
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<PAGE> 25
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, the options are considered non-qualified
stock options. An optionee does not recognize income and the Company does not
receive a deduction at the time a non-qualified stock option is granted. An
optionee exercising a non-qualified stock option recognized ordinary income and
the Company is entitled to a deduction equal to the excess of the fair market
value of the stock purchased (determined at the time of exercise) over the
amount paid for the stock.
Generally, a Participant selling shares acquired by exercising a
Non-Qualified Stock Option recognizes capital gain or loss (assuming the shares
are held as a capital asset). The amount of gain or loss is the difference
between the amount realized upon the sale and the sum of the option price and
the amount or ordinary income recognized in connection with exercising the
Non-Qualified Stock Option. Any gain or loss is short-term, mid-term or
long-term capital gain or loss, depending on the holding period of the shares.
The foregoing is merely a summary of the tax consequence of stock options
and does not purport to be a complete description of the federal income tax
aspects of the Plan. The Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended, and is not qualified under
Section 401(a) of the Code.
REQUIRED VOTE FOR APPROVAL OF THE PLAN
The affirmative vote of a majority of votes casted at the annual meeting on
this proposal will be required for approval of the Stock Purchase Plan.
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND A VOTE FOR APPROVAL OF THE
STOCK PURCHASE PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
IN FAVOR OF THE PROPOSAL UNLESS THE SHAREHOLDER SPECIFIES OTHERWISE.
PROPOSAL NO. 5
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of the Audit Committee, has
selected KPMG LLP ("KPMG"), independent public accountants, to audit the
financial statements of the Company for the fiscal year ending March 31, 2000.
KPMG has audited the Company's financial statements for each of the Company's
fiscal years since the Company's formation in 1968. One or more representatives
of KPMG will be present at the Annual Meeting and will have the opportunity to
make a statement and/or respond to appropriate questions that may be raised by
shareholders.
OTHER INFORMATION
SHAREHOLDERS' PROPOSALS FOR FISCAL 2000 ANNUAL MEETING
Shareholders may submit proposals appropriate for shareholder action at the
Company's Annual Meetings consistent with regulations adopted by the Securities
and Exchange Commission. For such proposals to be considered for inclusion in
the proxy statement and formal proxy for the 1999 Annual Meeting, they must be
received by the Company no later than March 14 , 2000. Proposals should be
directed to Christopher A. Head, Esq., Secretary, Comptek Research, Inc., 2732
Transit Road, Buffalo, New York 14224.
OTHER BUSINESS
As of the date of this Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the Annual
Meeting is that hereinabove set forth. If any other matter or matters are
properly brought before the Annual Meeting, or any adjournment or adjournments
thereof, it is
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<PAGE> 26
the intention of the persons named in the accompanying form of proxy, based upon
the discretionary authority granted in such proxy, to vote the proxy on such
matters in accordance with their judgment.
A COPY OF THE COMPANY'S FISCAL 1999 ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION ON FORM 10-K IS AVAILABLE AFTER JUNE 30, 1999, AND PROVIDED
WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST DIRECTED TO THE SECRETARY,
COMPTEK RESEARCH, INC., 2732 TRANSIT ROAD, BUFFALO, NEW YORK 14224.
By order of the Board of Directors,
/s/ Christopher A. Head
CHRISTOPHER A. HEAD,
Secretary
Dated: July 12, 1999
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<PAGE> 27
EXHIBIT A
COMPTEK RESEARCH, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of this Employee Stock Purchase Plan (the "Plan")
is to advance the interest of Comptek Research, Inc. (the "Company") by
encouraging and enabling the acquisition of a larger personal proprietary
interest in the Company by its Eligible Employees upon whose judgment and keen
interest the Company and its Designated Subsidiaries are largely dependent for
the successful conduct of their operations. It is anticipated that the
acquisition of such proprietary interest in the Company will stimulate the
efforts of such Eligible Employees on behalf of the Company and its Designated
Subsidiaries and strengthen their desire to remain with the Company and its
Designated Subsidiaries. It is also expected that the opportunity to acquire
such a proprietary interest will enable the Company and its Designated
Subsidiaries to attract and retain desirable personnel.
The Plan is intended to replace the 1996 Employee Stock Purchase Plan and
comply with Section 423 of the Internal Revenue Code.
2. DEFINITIONS. When used in this Plan, unless the context otherwise
requires:
(a) "Account" shall mean an account established in the name of each
Participant which shall consist of his Payroll Contributions made to the
Plan, less any amounts previously expended to acquire Shares under the Plan
on his behalf during any previous Option Period.
(b) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted at any time.
(c) "Committee" shall mean a committee of the Board of Directors, as
described in Section 5 hereof.
(d) "Company" shall mean Comptek Research, Inc., a New York
corporation, and any Designated Subsidiary of the Company.
(e) "Date of Exercise" shall mean the last day of the related Option
Period.
(f) "Date of Grant" shall mean April 1st, July 1st, October 1st, or
January 1st, as the case may be.
(g) "Designated Subsidiary" shall mean any Subsidiary which has been
designed by the Board of Directors, from time to time in its sole
discretion, as eligible to participate in the Plan.
(h) "Effective Date" shall mean August 13, 1999.
(i) "Eligible Compensation" shall mean the gross compensation payable
to an Eligible Employee by the Company or a Subsidiary during the Plan
Year, before deductions required by law or authorized by the employee,
including salary and sales commissions, management incentives, bonuses,
overtime, and other special payments.
(i) "Eligible Employee" shall mean an employee of the Company or any
Designated Subsidiary who has met the requirements of Section 3 hereof.
(j) "Fair Market Value" on a specified date shall mean the average of
the bid and asked closing prices at which one Share is traded on the
over-the-counter market, as reported on the National Association of
Securities Dealers Automated Quotation System, or the closing price for a
Share on the stock exchange, if any, on which Shares are primarily traded
at such time, but if no Shares were traded on such date, then on the last
previous date on which a Share was so traded, or, if none of the above is
applicable, the value of a Share as established by the Board of Directors
for such date using any reasonable method of valuation.
(k) "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended.
(l) "Option" shall mean the Options issued pursuant to this Plan.
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<PAGE> 28
(m) "Option Period" shall mean, with respect to any Option, the three
(3) consecutive month period beginning as of the Date of Grant.
(n) "Option Price" shall mean an amount equal to 85% of the Fair
Market Value of a Share as of the Date of Grant or the Date of Exercise,
whichever is less; provided, however, that in no event shall the Option
Price be less than the par value of a Share.
(o) "Participant" shall mean an Eligible Employee who has elected to
make Payroll Contributions pursuant to Section 6 hereof.
(p) "Payroll Contributions" shall mean contributions made to the Plan
by the Participant pursuant to Section 6 hereof.
(q) "Plan" shall mean this Employee Stock Purchase Plan of Comptek
Research, Inc., as embodied herein and as it may be amended from time to
time.
(r) "Plan Year" shall mean the twelve (12) consecutive month period
beginning as of each January 1st.
(s) "Share" shall mean a share of common stock of the Company, par
value $.02.
(t) "Subsidiary" shall mean any "subsidiary corporation," as such term
is defined in Section 424(f) of the Internal Revenue Code.
3. ELIGIBILITY. Each employee of the Company or any Designated Subsidiary
whose customary employment is more than 20 hours per week shall be eligible to
participate in the Plan as of the Effective Date or the first Option Period
following the date he has been employed by the Company or a Subsidiary for at
least 30 days, whichever is later; provided, however, that an employee shall not
be eligible to receive an Option under the Plan if, immediately after the Option
is granted, the employee would own stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or any Subsidiary. For purposes of this paragraph, the rules of Section 425(d)
of the Internal Revenue Code shall apply in determining the stock ownership of
an employee, and stock which the employee may purchase under outstanding Options
shall be treated as stock owned by the employee.
4. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 14, the
maximum number of Shares which may be purchased under the Plan shall be 400,000
Shares, plus an annual increase to be added on the first day of each fiscal year
of the Company occurring during the term of the Plan beginning on April 1, 2000,
equal to the lesser of (i) 200,000 Shares or (ii) an amount determined by the
Board of Directors. Shares subject to the Plan may be authorized but unissued
Shares, treasury Shares, or Shares purchased on the market for the purpose of
the Plan, as the Board of Directors may determine.
5. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board
of Directors. In the alternative, the Board of Directors may appoint a Committee
of members of the Board of Directors. Each member of the Committee shall hold
office until a successor is designated as a member of the Committee by the Board
of Directors. Any vacancy in the Committee may be filled by a resolution adopted
by a majority of the full Board of Directors. Any member of the Committee may be
removed at any time, with or without cause, by resolution adopted by a majority
of the full Board of Directors. A member of the Committee may resign from the
Committee at any time by giving written notice to the President or Secretary of
the Company, and unless otherwise specified therein, such resignation shall take
effect upon receipt thereof. The acceptance of such resignation shall not be
necessary to make it effective. The Committee shall establish such rules and
procedures as are necessary or advisable to administer the Plan. If the Board of
Directors does not appoint a Committee pursuant to this Section 5, then, for
purposes of administering the Plan, the term "Board of Directors" shall be
substituted for the term "Committee" whenever it appears in the Plan.
6. GRANT OF OPTIONS. As of each Date of Grant, the Committee will offer
Options under the Plan to all Participants. The amount of Shares which may be
purchased pursuant to such Options shall be determined in accordance with the
formula set forth in Section 8 hereof; provided, however, that no Participant
may purchase more than 1,200 Shares pursuant to the Plan during any Plan Year.
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<PAGE> 29
An Eligible Employee may participate in the Plan only by means of payroll
deductions. Each Eligible Employee who elects to participate in the Plan shall
deliver to the Committee, at least 20 days prior to a Date of Grant, a written
notice on a form prescribed by the Committee, whereby he authorizes the Company
or a Subsidiary, as the case may be, to deduct an amount per pay period from his
Eligible Compensation beginning as of such Date of Grant and use it to purchase
Shares on his behalf pursuant to the Plan. The Payroll Contributions shall be
equal to a percentage of the Participant's Eligible Compensation, as specified
by the Participant, up to a maximum of 10% of his Eligible Compensation, but may
not exceed an amount which, if used to purchase Shares pursuant to the Plan,
would exceed the limitations set forth in Section 3, Section 7 or this Section
6. The Payroll Contributions, once authorized, shall continue in effect until
the Participant terminates his employment, withdraws from the Plan, or changes
the rate of his Payroll Contributions in accordance with this Section 6. The
Company shall establish on its books for each Participant an Account to which
his Payroll Contributions shall be credited. No interest shall accrue on the
Payroll Contributions of a Participant.
A Participant may not change his Payroll Contributions during an Option
Period. A Participant may elect to change his Payroll Contributions for a
subsequent Option Period by providing a notice to the Committee, on a form
prescribed by the Committee, not less than 20 days prior to the Date of Grant
for the Option Period with respect to which such change is to be effective,
setting forth the new amount of his Payroll Contribution.
7. $25,000 LIMITATION. Notwithstanding any other provision of this Plan to
the contrary, an employee shall not be granted an option pursuant to this Plan
or under any other employee stock purchase plan (within the meaning of Section
423 of the Internal Revenue Code) maintained by the Company or a Subsidiary
pursuant to which the employee's right to purchase Shares under all such options
would accrue at a rate at which the Fair Market Value of the Shares (determined
at the time the option is granted) would exceed $25,000 for each calendar year
in which any such option granted to such employee is outstanding at any time.
8. EXERCISE OF OPTIONS. Each Participant automatically and without any act
on his part will be deemed to have exercised his Option on each Date of
Exercise. The number of Shares subject to each Option shall be the quotient of
the balance credited to the Participant's Account as of the Date of Exercise
divided by the Option Price of the Shares; and provided, however, that if the
number of Shares which remain to be issued under the Plan is less than the
numbers of Shares to be purchased as of such Date of Exercise, based on the
amounts then credited to the Participant's Accounts, a pro rata allocation of
the available Shares shall be made among the Participants. Any balance remaining
in a Participant's Account after payment of the Option Price for Shares
purchased pursuant to this Section 8 shall be carried over into the
Participant's Account for the subsequent Option Period, or refunded if there
will be no such subsequent Option Period. Each Participant will receive a
statement of the status of his Account as soon as practicable after the end of
each Option Period.
9. DELIVERY OF SHARE CERTIFICATES. The books of the Company's transfer
agent shall show the Participant as the shareholder of record with respect to
the Shares purchased on his behalf pursuant to the Plan. The Participant may
elect to receive a certificate issued in his name for all or part of the Shares
purchased on his behalf pursuant to the Plan with respect to which he has not
previously received a certificate. Such election shall be made in writing to the
Committee on a form prescribed by the Committee. The certificate will be
delivered to the Participant as soon as practicable following receipt of his
election.
10. WITHDRAWAL FROM THE PLAN. Any Participant may withdraw in whole from
the Plan at any time. A Participant who wishes to withdraw from the Plan must
deliver to the Committee a notice of withdrawal on a form prescribed by the
Committee. The Committee, promptly following the time when the notice of
withdrawal is delivered, will refund to the Participant the amount of the
balance in his Account, and thereupon, his Payroll Contributions shall cease and
no additional Shares shall be purchased on his behalf under the Plan until he
again elects to become a Participant in the Plan. A Participant who withdraws
from the Plan shall be eligible to participate again in the Plan commencing with
the Date of Grant which next follows the six (6) consecutive month period
beginning with the date as of which the Participant elects to withdraw from the
Plan, in accordance with the procedures set forth in Section 6 hereof.
11. TERMINATION OF EMPLOYMENT.
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11.1 TERMINATION OF EMPLOYMENT OTHER THAN BY RETIREMENT OR DEATH. If a
Participant's employment with the Company and its Subsidiaries terminates for
any reason other than his retirement (on or after age 65 or such other date as
of which he is eligible to retire in accordance with the Company's or a
Subsidiary's tax-qualified employee pension benefit plan) or death, his
participation in the Plan shall cease as of the date of the termination of his
employment. The Company promptly will refund to him the amount of the balance in
his Account and thereupon his interest in the Plan and any Options granted under
the Plan shall terminate. For purposes of this Section 11.1, a Participant's
employment will be considered terminated if he is absent due to sickness or
other disability for more than 90 days.
11.2 TERMINATION BY RETIREMENT. If a Participant's employment with the
Company and its Subsidiaries terminates on or after the date he attains age 65
or such other date as of which he is eligible to retire in accordance with the
Company's or a Subsidiary's tax-qualified employee pension benefit plan, he may,
by written notice to the Committee, either (i) exercise his Option as of his
termination of employment, in which event the Company shall apply the balance of
his Account under the Plan to the purchase of whole Shares at the Option Price
and refund the excess, if any, or (ii) request payment of the balance in his
Account under the Plan, in which event the Company promptly shall make such
payment, and thereupon his interest in the Plan and any Options granted under
the Plan shall terminate. If the Option is exercised, the date he terminates his
employment shall be deemed to be a Date of Exercise for the purpose of computing
the Option Price of the Shares. If the Company does not receive such notice as
of the date the Participant terminates his employment, the Participant shall be
conclusively presumed to have elected alternative (ii) and requested payment of
the balance of his Account.
11.3 TERMINATION BY DEATH. If a Participant's employment with the Company
and its Subsidiaries is terminated because of his death, the executor of his
will or the administrator of his estate, by written notice to the Committee, may
either (i) exercise the Participant's Option as of the date of his death, in
which event the Company shall apply the balance of the Participant's Account
under the Plan to the purchase of whole Shares at the Option Price and refund
the excess, if any, or (ii) request payment of the balance of the Participant's
Account under the Plan, in which event the Company promptly shall make such
payment, and thereupon the Participant's interest in the Plan and the
Participant's interest in any Options granted under the Plan shall terminate. If
the Option is exercised, the date of the Participant's death shall be deemed to
be a Date of Exercise for the purpose of computing the Option Price of the
Shares. If the Company does not receive such notice within 90 days of the
Participant's death, the Participant's representative shall be conclusively
presumed to have elected alternative (ii) and requested the payment of the
balance of his Account.
12. RESTRICTION UPON ASSIGNMENT. An Option granted under the Plan shall not
be transferable otherwise than by will or the laws of descent and distribution,
and is exercisable during the Participant's lifetime only by him. A
Participant's interest in the Plan or in any funds credited to his Account may
not be assigned or transferred and the Company will not recognize and shall be
under no duty to recognize assignment or purported assignment by a Participant
of his Option or of any rights under or interest in his Option or Account.
13. OPTION HOLDER NOT A STOCKHOLDER. An Option holder shall not be deemed
to be the holder of, or to have any of the rights of a stockholder with respect
to, any Shares subject to such Option unless and until the Option shall have
been exercised pursuant to the terms thereof and said Participant's name shall
have been entered as a stockholder of record on the books of the Company.
Thereupon, said Participant shall have full voting, dividend and other ownership
rights with respect to such Shares.
14. ADJUSTMENT OF SHARES. If prior to the complete exercise of any Option
there shall be declared and paid a stock dividend upon the Shares or if the
Shares shall be split up, converted, exchanged, reclassified, or in any way
substituted for the Option, to the extent that it has not been exercised, shall
entitle the holder thereof upon the future exercise of the Option to such number
and kind of securities or cash or other property, subject to the terms of the
Option, to which he would have been entitled had he actually owned the Shares
subject to the unexercised portion of the Option at the time of the occurrence
of such stock dividend, split-up, conversion, exchange, reclassification or
substitution, and the aggregate purchase price upon the future exercise of the
Option shall be equal to the lesser of 85% of the Fair Market Value of a Share
as of the Date of Grant, determined as if the originally optioned Shares were
being purchased thereunder, or 85% of the Fair Market Value of the Shares or
other securities, cash or property actually acquired upon the exercise of the
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Option, determined as of the Date of Exercise. Any fractional shares or other
securities payable upon the exercise of the Option as a result of such
adjustment shall be payable in cash based upon the Fair Market Value of such
shares or securities at the time of such exercise. If any such event should
occur, the number of Shares with respect to which Options remain to be issued,
or with respect to which Options may be reissued, shall adjusted in a similar
manner.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger, or consolidation in which the Company is not the
surviving corporation, or in which the Company becomes a subsidiary of another
corporation, or upon the sale of all or substantially all of the property of the
Company to another corporation, the Plan and the Options issued thereunder shall
terminate, unless provision is made in connection with such transaction for the
assumption of Options theretofore granted, or the substitution for such Options
of new options of the successor employer corporation or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares and
the per share exercise prices.
15. ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES LAWS. Before issuing
and delivering any Shares to a Participant, the Company may: (i) require the
holder to give satisfactory assurances that the Shares are being purchased for
investment and not with a view to resale or distribution, and will not be
transferred in violation of applicable securities laws; (ii) restrict the
transferability of such Shares and require a legend to be endorsed on the
certificates representing the Shares; and (iii) condition the exercise of an
Option or the issuance and delivery of Shares upon the listing, registration or
qualification of the Shares covered by such Option upon a securities exchange or
under applicable securities laws.
The Plan is intended to comply with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended. Any provision inconsistent with such Rule
shall be inoperative and shall not affect the validity of the Plan.
16. INCOME TAX WITHHOLDING. If the Company or a Subsidiary shall be
required to withhold any amounts by reason of any federal, state or local tax
rules or regulations in respect of the payment of cash or the issuance of Shares
pursuant to the exercise of an Option, the Company or such Subsidiary shall be
entitled to deduct and withhold such amounts from any cash payments to be made
to the Participant. In any event, the Participant shall make available to the
Company or such Subsidiary, promptly when requested by the Company or such
Subsidiary, sufficient funds to meet the requirements of such withholding, and
the Company or such Subsidiary shall be entitled to take and authorize such
steps as it may deem advisable in order to have such funds made available to the
Company or such Subsidiary out of any funds or property due or to become due to
the Participant.
17. ADMINISTRATION AND AMENDMENT OF THE PLAN. Except as hereinafter
provided, the Board of Directors and the Committee, if any, may at any time
withdraw or from time to time amend the Plan as it relates to, and the terms and
conditions of, any Option not theretofore granted, and the Board of Directors
and the Committee, if any, with the consent of each adversely affected
Participant, may at any time cancel any outstanding Option or withdraw or from
time to time amend the Plan as it relates to, and the terms and conditions of,
any outstanding Option. Notwithstanding the foregoing, any amendment by the
Board of Directors or the Committee which would increase the number of Shares
issuable under Options or change the class of employees to whom Options may be
granted shall be subject to the approval of the shareholders of the Company
within one (1) year of such amendment.
Determinations of the Committee as to any question which may arise with
respect to the interpretation of the provisions of the Plan and Options shall be
final. The Committee may authorize and establish such rules, regulations and
revisions thereof, not inconsistent with the provisions of the Plan, as it may
deem advisable to make the Plan and Options effective or provide for their
administration, and may take such other action with regard to the Plan and
Options as it shall deem desirable to effectuate their purpose.
18. COSTS AND EXPENSES. No brokerage or related commissions or fees shall
be charged by the Company in connection with the purchase by Participants of
Shares under the Plan. All costs and expenses incurred in administering the Plan
shall be borne by the Company. Any amounts held in the Participant's Accounts
shall be segregated from the other assets of the Company; provided, however,
that nothing in this Plan shall be construed to create a trust or cause the
Company or any Subsidiary to be considered a fiduciary with respect to
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such Accounts. Neither the Company nor any Subsidiary shall be obligated to pay
interest with respect to such Accounts.
19. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Shares pursuant to this Plan will be used for general corporate
purposes, and the Company shall not be obligated to segregate Payroll
Contributions to the Plan.
20. EFFECTIVE DATE OF THE PLAN. This Plan is conditioned upon its approval
at any special or annual meeting of the shareholders of the Company on or before
December 31, 1999, by the vote of the holders of a majority of the outstanding
Shares of the Company voting either in person or by proxy, at a duly held
shareholders' meeting; except that this Plan is adopted and approved by the
Board of Directors as of the Effective Date to permit the grant of Options prior
to the approval of the Plan by the shareholders of the Company as aforesaid. In
the event that this Plan is not approved by the shareholders of the Company,
this Plan and any Options granted hereunder shall be void and of no force or
effect and the Committee shall promptly refund to each Participant the amount of
the balance of his Account.
21. FINAL ISSUANCE DATE. No Options shall be granted under the Plan after
June 30, 2005, and no Shares shall be issued under the Plan after October 31,
2005.
22. WORD USAGE. Except when otherwise indicated by the context, any
masculine terminology used herein also includes the feminine and neuter, and
vice versa, and the definition of any term herein in the singular shall also
include the plural, and vice versa.
23. CALCULATION OF TIME. In determining time periods within which an event
or action is to take place for purposes of the Plan, no fraction of a day shall
be considered and any act, the performance of which would fall on a Saturday,
Sunday, holiday or other non-business day, may be performed on the next
following business day.
24. EFFECT ON PRIOR PLAN. Subject to shareholder approval of this Plan as
elsewhere herein provided, the 1996 Employee Stock Purchase Plan (the "Prior
Plan") is hereby superseded and shall be of no further force and effect. Any
Payroll Contributions held in a Participant's Account under the Prior Plan shall
be transferred to a new Account under the Plan.
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EXHIBIT B
(DELETED MATERIAL IS BRACKETED)
(ADDED MATERIAL IS DOUBLE UNDERLINED)
1994 STOCK OPTION PLAN
FOR
NON-EMPLOYEE DIRECTORS,
AS AMENDED
ARTICLE 1 -- ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Comptek Research, Inc., a New York
corporation with its corporate headquarters located at 2732 Transit Road,
Buffalo, NY 14224 ("Comptek"), hereby establishes a stock option plan for
non-employee members of its Board of Directors (the "Plan"). All options granted
under the Plan will be Nonqualified Stock Options ("NQSO").
Upon ratification by affirmative vote of a majority of Shares voting at
Comptek's 1994 Annual Meeting of Shareholders, the Plan shall become effective
as of December 10, 1993, (the "Effective Date") and shall remain in effect as
provided in 1.3 herein. Options may be granted prior to shareholder ratification
of the Plan; provided, however, that in the event shareholder ratification of
the Plan is not obtained at Comptek's 1994 Annual Meeting of Shareholders, this
Plan shall automatically terminate and all outstanding Options granted shall
become null and void.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to attract and retain
the services of experienced and knowledgeable independent directors for the
benefit of Comptek and its shareholders, and to encourage share ownership by
members of the Board of Directors of Comptek who are not employees, in order to
promote long-term shareholder value through ownership of common stock.
1.3 DURATION OF THE PLAN. Subject to the right of the Board of Directors of
Comptek to terminate the Plan at any time pursuant to Article 7 hereof, the Plan
shall remain in effect until all Shares subject to the Plan shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Option be granted under the Plan on or after December 9, 2003.
ARTICLE 2 -- DEFINITIONS
Whenever used in the Plan, the following terms shall have the meaning set
forth below:
(a) "Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Option granted pursuant to the Plan.
(b) "Board" means the Board of Directors of Comptek Research, Inc., as
constituted from time to time.
(c) "Change in Control" means any of the following events:
(i) The acquisition by any person (within the meaning of in
Sections 13(d) or 14(d) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
thirty-three percent (33%) or more of the combined voting power of
Comptek's then outstanding voting securities; or
(ii) The individuals who, as of the date hereof, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute a
majority of the Board. For purposes of this definition, if the election,
or nomination for election by Comptek's shareholders, of any new
Director was approved by a vote of a majority of the Incumbent Board,
such new Director shall be deemed a member of the Incumbent Board; or
(iii) Approval by shareholders of Comptek of (a) a merger or
consolidation involving Comptek if the shareholders of Comptek,
immediately before such merger or consolidation, do not as a result of
such merger or consolidation, own, directly or indirectly more than
sixty-seven percent (67%) of the combined voting power of the then
outstanding voting securities of the corporation resulting from
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such merger of consolidation in substantially the same proportion as
their ownership of the combined voting power of the voting securities of
Comptek outstanding immediately before such merger or consolidation, or
(B) a complete liquidation or dissolution of Comptek or an agreement for
the sale or other disposition of all or substantially all of the assets
of Comptek.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur pursuant to subsection (i), solely because thirty-three percent
(33%) or more of the combined voting power of Comptek's then outstanding
securities is acquired by (A) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by
Comptek or any of its Subsidiaries or (B) any corporation which,
immediately prior to such acquisition, is owned directly or indirectly
by the shareholders of Comptek in the same proportion as their ownership
of stock in Comptek immediately prior to such acquisition.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" means the committee specified in Article 3.
(f) "Director" means a member of the Board.
(g) "Disability" means a permanent and total disability, within the
meaning of Code Section 22(e)(3) as determined by the Committee in good
faith, upon receipt of sufficient competent medical advice from one or more
individuals, selected by the Committee, who are qualified to give
professional medical advice.
(h) "Eligible Director" means a member of the Board who is not an
employee of Comptek or any of its Subsidiaries.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(j) "Fair Market Value" of a Share of common stock shall be (i) the
closing sale price of a Share of common stock as reported on the principal
securities exchange on which Shares of common stock are then listed or
admitted to trading on the day as of which such determination of Fair
Market Value is to be made, or if no trading shall have occurred on such
day, then on the latest preceding day on which trading shall have occurred
or (ii) if not so traded, the average of the closing bid and ask prices as
reported on the National Association of Securities Dealers Automated
Quotation System or if not so reported, as furnished by any member of the
National Association of Securities Dealers, Inc. selected by the Board, on
the day as of which such determination of Fair Market Value is to be made,
or if no sales shall have occurred on such day, then on the latest
preceding day on which sales shall have occurred. In the event that the
price of a share of common stock shall not be reported in any manner
described in the preceding sentence, the Fair Market Value of a Share of
common stock shall be determined by the Board in its absolute discretion.
(k) "Option" means an Option to purchase Shares granted pursuant to
Article 5 hereof.
(l) "Option Certificate" means a certificate setting forth the terms
and provisions applicable to Options granted to Participants.
(m) "Option Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option.
(n) "Participant" means an Eligible Director who has been granted an
Option under the Plan.
(o) "Shares" means shares of common stock of Comptek Research, Inc.,
par value of $0.02 per share.
(p) "Subsidiary" means any corporation in which Comptek owns directly,
or indirectly through subsidiaries, at least fifty percent (50%) of the
total combined voting power of all classes of stock, or any other entity
(including, but not limited to, partnerships and joint ventures) in which
Comptek owns at least fifty percent (50%) of the combined equity thereof.
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ARTICLE 3 -- ADMINISTRATION
3.1 THE COMMITTEE. The Board shall appoint a committee to be known as the
Directors' Stock Option Plan Committee (the "Committee"), which shall consist of
at least three Directors to administer the Plan as contemplated by Rule 16b-3
pursuant to the Exchange Act, or any successor or replacement rule. Committee
members shall receive no additional compensation for such service. Eligible
Directors who are eligible for options under the Plan may vote on matters
affecting the administration of the Plan and may serve as members of the
Committee.
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full power except
as limited by law or by the Certificate of Incorporation or Bylaws of Comptek,
and subject to the provisions herein, to administer the Plan, and to construe
and interpret the Plan and any agreement or instrument entered into under the
Plan. The Committee, however, shall have no discretion with respect to the
eligibility or selection of directors to receive Options under [the Plan]
Section 5.1(a) hereof, the number of shares of stock subject to any such
Options, [of the Plan, or] the purchase price or vesting period thereunder,[the
vesting period,] or the timing of Option grants under Section 5.1(a) hereof.
[The Committee shall not have the authority to take any action which would
result in the loss of eligibility of grants under the Plan for the "formula
based" exemption under Rule 16b-3(c)(ii)(A) of the Exchange Act.] The Board
shall have exclusive authority to grant Options under Section 5.1(b) hereof, and
to determine the Option Price, duration and vesting of such Options, subject to
the terms and provisions of the Plan. The determination of the Committee in the
administration of the Plan, or the Board with respect to Options granted under
Section 5.1(b), as described herein, shall be final and conclusive and binding
upon all persons including, without limitation, Comptek, its shareholders and
persons granted options under the Plan. The Secretary of Comptek shall be
authorized to implement the Plan in accordance with its terms and to take such
actions of a ministerial nature as shall be necessary to effectuate the intent
and purposes thereof.
3.3 NO GUARANTEED TERM OF OFFICE. Nothing in this Plan or any modification
hereof, and no grant of an Option, or any term thereof, shall be deemed an
agreement or condition guaranteeing to any Eligible Director any particular term
of office or limiting the right of Comptek, the Board, or the shareholders to
terminate the term of office of any Eligible Director under the circumstances
set forth in the Comptek's Certificate of Incorporation or By-Laws, or as
otherwise provided by law.
ARTICLE 4 -- SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.2
herein, the total number of Shares available for grant under the Plan shall be
[100,000] 300,000 Shares. The Shares may be authorized but unissued Shares,
reacquired Shares or a combination thereof.
4.2 ADJUSTMENTS IN AVAILABLE SHARES AND OPTIONS. In the event of any
merger, reorganization, consolidation, recapitalization, separation,
liquidation, stock dividend, split-up, share combination, or other change in the
capital structure of Comptek affecting the Shares, such adjustment shall be made
in the number of Shares which may be granted under the Plan, and in the number
of and/or price of Shares subject to outstanding Options under the Plan, as may
be determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights under the Plan or any
Option; provided that the number of Shares subject to any Option shall always be
a whole number.
ARTICLE 5 -- STOCK OPTIONS
5.1 GRANT OF OPTIONS.
(a) Subject to the terms and provisions of the Plan, an Option to
purchase 10,000 Shares will automatically be granted on December 10, 1993,
to each then-Eligible Director. Each director who becomes an Eligible
Director after December 10, 1993, and before April 16, 1999,will
automatically be granted options on 10,000 Shares at the time he becomes a
non-employee member of the Board of Directors. Each director who becomes an
Eligible Director on or after April 16, 1999, will automatically be granted
options on 1,000 Shares at the time he becomes a non-employee member of the
Board of
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Directors. Each Eligible Director shall automatically receive an additional
Option to purchase 1,000 Shares, effective at the close of business five
(5) business days after the 1994 Annual Meeting of Shareholders and each
Annual Meeting thereafter, provided the individual in all respects
continues to be an Eligible Director. Further, each Eligible Director or
director who becomes an Eligible Director, shall automatically receive an
option to purchase 5,000 Shares as of the beginning of the calendar quarter
immediately following such director first acquiring ownership of at least
5,000 Shares. Provided, however, (i) any Eligible Director who already owns
at least 5,000 Shares as of July 25, 1997, shall automatically receive such
5,000 Share option-grant as of October 1, 1997, and (ii) each director who
becomes an Eligible Director after July 25, 1997, and then owns at least
5,000 Shares shall automatically receive such 5,000 Share option-grant as
of the beginning of the calendar quarter immediately following such
director becoming an Eligible Director. [As provided in Section 4.1 herein,
at no time shall more than 100,000 Shares be available for grant under the
Plan.]
(b) The Board shall have the authority in its discretion to grant to
any Eligible Director one or more Options to purchase such number of Shares
as may be determined by the Board, subject to the terms and provisions of
the Plan. Under this Section 5.1(b), (i) Options need not be granted to
each Eligible Director, (ii) the number of Shares subject to any Option
need not be the same as the number of Shares subject to any other Option,
and (iii) Options may be granted at different times to the same Eligible
Director.
(c) As provided in Section 4.1 herein, at no time shall more than
300,000 Shares be available for grant under the Plan.
5.2 OPTION CERTIFICATE. Each Option grant shall be evidenced by an Option
Certificate that shall specify the Option Price, the Option duration, the number
of Shares to which the Option pertains, and such other provisions as the
Committee shall determine.
5.3 OPTION PRICE. The Option Price for each Share subject to [the] an
Option granted under Section 5.1(a) hereof shall be equal to one hundred percent
(100%) of the Fair Market Value of a Share on the date [the] such Option is
granted. The Option Price for each Share subject to an Option granted under
Section 5.1(b) hereof shall be determined by the Board at the time of grant, but
shall not be less than one hundred percent (100%) of the Fair Market Value of a
Share on the date such Option is granted.
5.4 DURATION OF OPTIONS. Each Option granted under Section 5.1(a)
hereofshall expire on the tenth (10th) anniversary date of its grant. Each
Option granted under Section 5.1(b) hereof shall expire on such date as is
determined by the Board at the time of grant, but not later than the tenth
(10th) anniversary date of its grant.
5.5 EXERCISE OF OPTIONS. Subject to Sections 5.7 and 5.10 hereof, and all
other restrictions and conditions set forth in this Plan, (i) Options granted
under [the Plan] Section 5.1(a) hereof shall be exercisable [one (1) year after]
in full as of the date of grant and (ii) Options granted under Section 5.1(b)
hereof shall be exercisable as determined by the Board at the time of grant.
5.6 PAYMENT. Options shall be exercised by the delivery of a written notice
of exercise to the Secretary of Comptek, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares.
The Option Price upon exercise of any Option shall be payable to Comptek in
full either: (a) in cash or its equivalent, or (b) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price.
As soon as practicable after receipt of a written notification of exercise
and full payment, Comptek shall deliver to the Participant, in the name or names
designated by the Participant, Share certificates in an appropriate amount based
upon the number of Shares purchased under the Option(s).
5.7 TERMINATION OF MEMBERSHIP ON COMPTEK'S BOARD OF DIRECTORS.
(a) Termination by Death. If the service on the Board by a Participant
is terminated by reason of death, all outstanding Options granted to that
Participant shall remain exercisable at any time prior to the
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expiration date, or for one (1) year after the date of death, whichever
period is shorter, by such person or persons as shall have been named as
the Participant's beneficiary, or by such persons that have acquired the
Participant's rights under the Option by will or by the laws of descent and
distribution.
(b) Termination by Disability. If the service on the Board by a
Participant is terminated by reason of Disability, all outstanding Options
granted to that Participant shall remain exercisable at any time prior to
their expiration date, or for one (1) year after the date of such
termination, whichever period of shorter.
(c) Termination of Director's Service for Other Reasons. If the
service on the Board by a Participant shall terminate for any reason other
than the reasons set forth in subsections (a) and (b) of this Section 5.7,
all outstanding Options granted to that Participant shall remain
exercisable for a period ending on the expiration date of the Option or for
six (6) months after such termination, whichever period is shorter.
5.8 FORFEITURE OF OPTIONS. Unless an Option is otherwise exercisable
pursuant to Section 5.7 hereof, no Option may be exercised unless the
Participant is a member of the Board at the time of exercise and shall have been
continuously in office since the grant of the Option.
5.9 NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
except in accordance with the Participant's beneficiary designation, by will, or
by the laws of descent and distribution, or pursuant to the requirements of a
Qualified Domestic Relations Order. Further, all Options granted to a
Participant under the Plan shall be exercisable during his lifetime only by such
Participant or his guardian or legal representative.
5.10 CHANGE IN CONTROL. Upon the occurrence of a Change in Control, unless
otherwise specifically prohibited by the terms of applicable law or regulation,
any and all Options granted hereunder shall become immediately exercisable.
ARTICLE 6 -- BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan shall accrue in case of his death. Each such
designation shall revoke all prior designations by the same Participant, shall
be in a form prescribed by Comptek, and will be effective only when filed by the
Participant in writing with the Secretary of Comptek during the Participant's
lifetime. In the absence of any such designation, benefits remaining at the
Participant's death shall accrue to the Participant's estate.
ARTICLE 7 -- AMENDMENT, MODIFICATION, AND TERMINATION
AMENDMENT, MODIFICATION, AND TERMINATION. The Plan may be amended at any
time and from time to time by the Board as the Board shall deem advisable;
provided, however, that no amendment shall become effective without shareholder
approval if such shareholder approval is required by law, rule or regulation;
and provided further, to the extent required by Rule 16b-3 under Section 16 of
the Exchange Act, in effect from time to time, Plan provisions relating to the
amount, price and timing of Options granted under Section 5.1(a) hereof shall
not be amended more than once every six months, except that the foregoing shall
not preclude any amendment to comport with changes in the Internal Revenue Code
of 1986, the Employee Retirement Income Security Act of 1974 or the rules
thereunder in effect from time to time. No amendment of the Plan shall
materially and adversely affect any right of any participant with respect to any
Option theretofore granted without such Participant's written consent.
ARTICLE 8 -- WITHHOLDING
8.1 TAX WITHHOLDING. Comptek shall have the power and the right as set
forth in this Article 9 to deduct or withhold, or require a Participant to remit
to Comptek, an amount sufficient to satisfy any and all
36
<PAGE> 38
Federal, state, and local, taxes (including the Participant's FICA obligation)
required by law to be withheld with respect to any taxable event arising out of
or as a result of this Plan.
8.2 SHARE WITHHOLDING. With respect to tax withholding required upon the
exercise of Options, or upon any other taxable event hereunder, a Participant
may elect, subject to the approval of the Board, in its discretion, to satisfy
the withholding requirement, in whole or in part, by having Comptek withhold a
number of Shares, the Fair Market Value of which, in itself or when added to a
cash payment made by the Participant to Comptek, equals the amount of tax
required to be withheld. Any such election shall be made in conformity with Rule
16b-3e promulgated under the Exchange Act, including all requirements as to the
timing of the election and the exercise thereof.
ARTICLE 9 -- SUCCESSORS
All obligations of Comptek under the Plan, with respect to Options granted
hereunder, shall be binding on any successor to Comptek, whether the existence
of such successor is the result of a direct or indirect purchase, merger,
consolidation or otherwise, of all or substantially all of the business and/or
assets of Comptek.
ARTICLE 10 -- LEGAL CONSTRUCTION
10.1 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
10.2 REQUIREMENTS OF LAW. The granting of Options and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
10.3 SECURITIES LAW COMPLIANCE. Transactions under this Plan are intended
to comply with all applicable conditions of Rule 16b-3 of the Exchange Act.
10.4 GOVERNING LAW. To the extent not preempted by Federal law (or foreign
law, in the case of grants to Employees who are not United States residents),
the Plan, and any agreement hereunder, shall be construed in accordance with and
governed by the laws of the State of New York.
10.5 SEVERABILITY. In the event any provision of the Plan or any action
taken thereunto shall be held illegal or invalid for any reason, the illegality
or invalidity shall not affect the remaining parts of the Plan, and the Plan
shall be construed and enforced as if the illegal or invalid provision had not
been included, and the illegal or invalid action shall be deemed null and void.
37
<PAGE> 39
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, AUGUST 13, 1999
The undersigned hereby appoints CHRISTOPHER A. HEAD and LAURA L. BENEDETTI as
Proxies, each with the power to appoint his/her substitute, and hereby
authorizes them to represent and to vote, as designated on the reverse side, all
the shares of common stock of Comptek Research, Inc., held of record by the
undersigned on June 16, 1999, at the Annual Meeting of Shareholders to be held
on August 13, 1999, or any adjournments thereof, upon the matters set forth in
the Proxy Statement and, in their judgment and discretion, upon such other
business as may properly come before the meeting.
THE PROXY WILL BE VOTED FOR ELECTION OF THE DIRECTORS AND FOR ALL OTHER ITEMS
LISTED ON THE REVERSE SIDE UNLESS A CONTRARY INSTRUCTION IS GIVEN.
PLEASE FILL IN, DATE, AND SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING
ENVELOPE.
<PAGE> 40
<TABLE>
<CAPTION>
I plan to attend
the meeting.
[ ]
- -----------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL ELECTION OF THE NOMINEES IN ITEM 1, AND FOR ITEMS 2, 3, 4, AND 5.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
ITEM 1--ELECTION OF FOUR CLASS I DIRECTORS for a two-year term expiring at the ITEM 5--RATIFICATION OF SELECTION OF KPMG
2001 Annual Meeting: WAYNE E. MEYER, JAMES D. MORGAN, JOHN J. SCIUTO, LLP, independent accountants, as auditors for
AND HENRY P. SEMMELHACK. the Company for the Fiscal Year ending
FOR all nominees listed WITHHOLD AUTHORITY To withhold authority to vote March 31, 2000.
above (except as marked to vote for all for any individual nominee, FOR AGAINST ABSTAIN
to the contrary at right). nominees listed above. write that name in the space
provided below. [ ] [ ] [ ]
_____________________________
[ ] [ ] _____________________________
------------------------------------------------------------------------------------------------------- --------------------------
ITEM 2-- AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE
THE AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY FROM 10 COMMENTS/ADDRESS CHANGE [ ]
MILLION SHARES TO 20 MILLION SHARES Please mark this box if you have
an address change and mark change
FOR AGAINST ABSTAIN on mailing label.
[ ] [ ] [ ] RECEIPT IS HEREBY ACKNOWLEDGED OF THE COMPTEK
RESEARCH, INC. NOTICE OF MEETING
AND PROXY STATEMENT.
----------------------------------------------------------------------------------------------------------------------------------
ITEM 3-- ADOPTION OF THE 1999 EMPLOYEE STOCK PURCHASE PLAN
FOR AGAINST ABSTAIN Signature(s)___________________________________
[ ] [ ] [ ] ___________________________________
Date: ___________________________________
----------------------------------------------------------------------------------------------------------------------------------
ITEM 4--AMENDMENT OF THE 1994 STOCK OPTION PLAN FOR NON-EMPLOYEE
DIRECTORS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
------------------------------------------------------------------------------
PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING
EQUIPMENT WILL RECORD YOUR VOTES@
NOTE: Please sign as name appears hereon. Joint
owners should each sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give full
- ------------------------------------------------------------------------------ title as such.
</TABLE>
